On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Workday (NASDAQ:WDAY), reducing the stock's price target from $275.00 to $265.00. The firm maintained its Hold rating on the shares. This revision comes after Workday reported its third-quarter results, which aligned with expectations, and provided fourth-quarter guidance that slightly missed projections.
The company's early forecast for fiscal year 2026 anticipates a 14% increase in Subscription growth, which is slightly below the approximately 15% mid-term growth guidance previously set in the second quarter and reaffirmed during the Analyst Day in September. Deutsche Bank pointed out that the mid-term guidance had included some expected contribution from mergers and acquisitions, and the current projection for FY26 appears to factor in nearly a 30 basis point benefit from these activities.
According to Deutsche Bank, the less-than-expected guidance could be attributed to a conservative approach and certain revenue recognition challenges linked to strategic agreements secured in the third quarter. The analyst noted that these elements might not be fully acknowledged by some investors who had perceived mid-teens growth as a minimum expectation, especially since this target was only established a few months earlier, following an adjustment from the previous 17-19% growth forecast.
Workday's recent performance and forward-looking statements indicate a cautious stance in the face of potential headwinds, as the company navigates its strategic deals and aims to achieve its growth objectives. Despite the lowered price target, Deutsche Bank continues to hold a neutral position on the stock, suggesting a watchful approach as the company progresses towards its fiscal year 2026 goals.
In other recent news, Workday Inc (NASDAQ:WDAY). has been in the spotlight following mixed third-quarter results. The company reported a 16% increase in subscription revenue, reaching $1,559 million, and a similar rise in total revenue, which hit $2,160 million. Despite these strong figures, Workday adjusted its fiscal year 2026 subscription growth forecast to 14%, a decrease from earlier projections. This change has led to differing views from analysts.
Morgan Stanley (NYSE:MS) maintained its Overweight rating on Workday, raising the stock's price target to $330 from $315, despite the company's lowered forecast. In contrast, Piper Sandler shifted from an Overweight rating to a Neutral stance, citing anticipated declines in calculated remaining performance obligations (cRPO) growth. They lowered their price target to $270 and reduced their fiscal year 2026 growth forecast to 12.5% from 14%.
RBC Capital also maintained its Outperform rating on Workday, keeping its price target at $300.00. Despite delays in deal start times leading to a reduction in the full-year subscription guidance, RBC analysts were optimistic about the company's long-term prospects.
Finally, Workday announced leadership changes with Doug Robinson set to retire at the end of the fiscal year, and Rob Enslin joining as President and Chief Commercial Officer. These are among the recent developments at Workday.
InvestingPro Insights
Workday's recent financial performance and market position offer additional context to Deutsche Bank's analysis. According to InvestingPro data, Workday boasts a market capitalization of $71.3 billion and has demonstrated strong revenue growth, with a 17.07% increase over the last twelve months as of Q2 2025. This growth aligns with the company's projected 14% Subscription growth for fiscal year 2026, albeit slightly lower than previous mid-term guidance.
InvestingPro Tips highlight Workday's financial strength, noting that the company "holds more cash than debt on its balance sheet" and has "liquid assets exceed short term obligations." These factors could provide Workday with financial flexibility as it navigates potential headwinds and pursues its growth strategy.
The company's impressive gross profit margin of 75.77% underscores its operational efficiency, which may help offset concerns about the conservative guidance. However, investors should note that Workday is "trading at a high earnings multiple," with a P/E ratio of 46.28, suggesting that the market has high growth expectations priced into the stock.
For readers seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Workday, providing deeper insights into the company's financial health and market position.
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