Evercore ISI has adjusted its financial outlook for Workday (NASDAQ: NASDAQ:WDAY), reducing the price target to $290 from the previous $290 while sustaining an Outperform rating on the stock.
The firm anticipates Workday's second-quarter results to align with expectations, acknowledging the current unpredictable economic climate. They expect the company to uphold a conservative stance in its third-quarter and full fiscal year 2025 guidance.
Workday's subscription revenue is projected to meet or slightly exceed the $1.895 billion estimate, with calculated remaining performance obligations (CRPO) anticipated to be close to the guidance at approximately 15.5%.
Amidst economic uncertainties, CRPO guidance for the third quarter is expected to stay within the 15%-16% range, with no significant adjustments to the forecast for fiscal year 2025 subscription revenue of $7.7-$7.725 billion.
The firm has modestly reduced its fiscal year 2026 subscription revenue growth forecast from around 17% to approximately 15%, better reflecting a reduced growth expectation in the second half's CRPO. The revised price target of $290 accounts for a more conservative revenue outlook, which is somewhat offset by a slight increase in expected operating margins for fiscal year 2026.
Meanwhile, Workday has been the focus of several analyst firms. KeyBanc maintained its Overweight rating on Workday, with an emphasis on the company's upcoming second-quarter financial report and the anticipated cRPO growth between 15.5% to 16%.
Also, TD Cowen reiterated its Buy rating, highlighting positive developments in key vertical markets. Oppenheimer maintained an Outperform rating based on potential growth in the Financial Industry Sector and margin potential.
The company also saw changes in price targets, with BofA Securities reducing its price target to $265 from $275, citing macroeconomic pressures, while BMO Capital Markets held steady with a $300 price target.
InvestingPro Insights
As Workday (NASDAQ:WDAY) navigates through the current economic climate, data from InvestingPro offers a glimpse into the company's financial health and market position. With a robust market capitalization of $61.71 billion, Workday exhibits a strong presence in the Software industry, which is further underscored by its significant return over the last week and its status as a prominent player in the sector. An InvestingPro Tip highlights that Workday holds more cash than debt on its balance sheet, providing a cushion against market volatility and economic downturns.
Workday's P/E ratio stands at 40.71, reflecting a high earnings multiple that potential investors may weigh when considering the stock's value. Additionally, the company's Price / Book ratio is at 7.56, indicating that the stock is trading at a high valuation compared to its book value. Revenue growth remains robust with a 17.01% increase in the last twelve months as of Q1 2023, showcasing the company's ability to expand its financial top line amidst challenging conditions.
For readers looking to delve deeper into Workday's financials and stock performance, there are 11 additional InvestingPro Tips available, which could offer valuable insights for making informed investment decisions. The tips cover various aspects of Workday's financial status, including profitability predictions for the year and an analysis of the company's liquid assets in relation to short-term obligations. To explore these insights further, visit Workday's page on InvestingPro.
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