On Friday, TD Cowen adjusted its outlook on Workday (NASDAQ:WDAY), a leading provider of enterprise cloud applications for finance and human resources. The firm lowered its price target on the company's shares to $290 from the previous target of $330. Despite the reduction, TD Cowen maintained a Buy rating on the stock.
The adjustment followed Workday's announcement of a $5 million subscription revenue beat and a customer relationship planning order (cRPO) growth that met expectations at 18%. However, management at Workday has noted an increased level of scrutiny on larger deals.
Moreover, some industry sectors are showing signs of committing to lower-than-anticipated headcount growth during renewals, which has led the company to slightly reduce its revenue guidance for fiscal year 2025.
Despite these challenges, TD Cowen highlighted several positive aspects in Workday's report. The company has seen strength in its ME platform deals and is gaining traction with its go-to-market strategy through partners. These factors are considered to be significant positives amidst the current scenario.
TD Cowen suggests that Workday's stock may become more of a focus in the second half of the year. The firm's commentary points to expectations that the company's performance may pick up in the latter part of the year, potentially offering a different investment narrative as the year progresses.
InvestingPro Insights
As Workday (NASDAQ:WDAY) navigates through a period of increased deal scrutiny and cautious industry sector spending, TD Cowen's revised price target remains optimistic. Supporting this outlook, InvestingPro data provides additional context: Workday holds a market capitalization of $69.21 billion, signaling robust investor confidence.
Despite not having a current P/E ratio, the company's forward P/E ratio for the last twelve months as of Q4 2024 stands at 49.38, indicating expectations of strong earnings. Moreover, the revenue growth remains solid at 16.78% over the last twelve months, reflecting Workday's ability to expand its financial footprint.
Two InvestingPro Tips further enrich the investment narrative for Workday. Firstly, the company is trading at a low P/E ratio relative to near-term earnings growth, which could suggest an attractive entry point for investors considering future profitability. Secondly, Workday has been profitable over the last twelve months, reinforcing its financial stability and operational success. With these insights and 12 additional tips available on InvestingPro, investors have a comprehensive toolkit to assess Workday's potential. To delve deeper into these metrics, readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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