Needham cut its stock target for the day, maintaining a buy rating on Investing.com
Needham maintained its buy rating on the stock (NASDAQ: NASDAQ: ) but lowered the stock's price target to $300 from the previous $350. This update follows the company's participation in the annual Workday Rising customer conference and its analyst day.
During the customer conference, Workday showcased Gen-AI's new agent/bot platform called Illuminate, which aims to help customers accelerate and transform their work with actionable and realistic use cases.
Analyst Day provided insights that bolstered Needham's confidence in Workday's growth prospects, particularly highlighting the company's partner strategy as a key growth driver.
Needham's analysis suggests that Workday is on track to meet its target of 15% subscription revenue growth in fiscal year 2027. Additionally, the company has set a target of around 30% for the same financial year. If achieved, this growth could separate day-to-day stocks as a volatile combination in the near term.
The company's shares are currently trading at around 25 times the 2026 financial year, with a revenue to free cash flow growth (P/E/FCFg) ratio of around 0.9. This valuation compares to the industry standard, which typically trades between 1.0x and 1.2x free cash flow growth.
In other recent news, Workday reported a 17% increase in subscription revenue, to $1.903 billion, and revised its revenue growth forecast to 15%. The company also set financial targets for FY27, including an operating cash flow margin of 34% and a free cash flow margin of 30%.
Analyst firms Piper Sandler, CapitalOne, UBS, BofA Securities, and JPMorgan maintained their respective ratings and price objectives for Workday. The company announced its intention to acquire Evisort, an AI document intelligence platform, and launched four artificial intelligence agents, Recruiter, Expenses, Sequence, and Workday Performance, designed to automate and improve processes in human resources and finance.
InvestingPro Insights
As Workday (NASDAQ:WDAY) continues to innovate and grow, the latest data from InvestingPro provides a clear picture of the company's financial health and market value. Workday's market capitalization stands at a robust $65.48 billion, underscoring its significant presence in the software industry. The company's P/E ratio, the ratio of its current share price relative to earnings per share, is 42.59, which is evidence of the high expectations investors have for future earnings growth.
InvestingPro Tips highlights Workday's gross profit margins, which reached 75.77% in the last twelve months from Q1 2023. This shows the company's efficiency in maintaining profitability while controlling cost of goods sold. In addition, Workday's liquid assets exceed its current liabilities, providing financial stability and the ability to invest in growth opportunities. For those interested in further analysis, InvestingPro offers additional tips on Workday's financial performance and market dynamics.
Finally, it's important to note that analysts have revised their prices higher in the future, which indicates optimism about Workday's prospects. There are 25 additional InvestingPro tips available for Business Day, providing in-depth information for investors considering this major player in the software industry.
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