Wells Fargo maintains rating on Workday on long-term view
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Wells Fargo Securities maintained an Overweight rating on Workday (NASDAQ:WDAY) noting that targets were reset but the long-term game was still on.
The company's stock has fallen ~10% premarket on Thursday.
The analysts said they were caught off guard by the model reset but ultimately view this as the right longer-term decision for the new management team and would buy into the post a-day pullback/better go-forward setup from here.
Workday provided new FY27 targets that the analysts think were largely seen as underwhelming, but should also provide ample cushion going forward.
The details included â annual subscription revenue growth of 17-19% (compared to prior ~20% to $10BB), suggesting durability given most recent quarter, or MRQ, growth of ~19%; FY27 OM target of 25%+ versus prior ~25% at $10Bn, CFFO (Cash flows from operations) margin lowered to 30% from 35% prior, FCF (Free cash flow) margin target of ~25% (unstated previously).
Workday's new CFO Zane Rowe chose to to disclose 12-month backlog, which grew 21% MRQ and consistently between 20-21% prior four quarters. The analysts view the incremental disclosure as positive and supportive of the company's ability to grow NTM subscription revenue near 20%.
Wells Fargo has a price target of $280 on WDAY.
Workday has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. The Seeking Alpha authors' average rating is also Hold, however, the average Wall Street analysts' rating is more positive with a Buy rating.

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