Workday rises even as Guggenheim starts at sell, sees risks going into slowdown
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Workday (NASDAQ:WDAY) finished higher on Friday, even as investment firm Guggenheim started coverage on the human resources software company with a sell rating, noting it is at risk in an economic slowdown. 
Guggenheim analyst John DiFucci put a $134 price target on Workday (WDAY), noting that signs first started to appear in its fiscal first-quarter results and it's likely that the company will have a "challenge" hitting its fiscal 2023 revenue guidance, as well as its 2026 target of $10B in revenue. 
"So, we donât believe Workday will remain an organic high growth company (defined as 20% growth for the foreseeable future) even 1-2 years out," DiFucci wrote in a note to clients.
Workday (WDAY) shares gained more than 6% to finish at $176.22.
In addition, DiFucci noted that Workday (WDAY) was "successful" in its first act to become a horizontal application vendor, having surpassed $5B in revenue in fiscal 2022 and 20% annual subscription growth. Human capital management, or HCM, is still the key driver for Workday (WDAY), with an estimated 15% to 20% of the total market, but it's likely that HCM will not be enough to help the company hit revenue estimates in fiscal 2023 through fiscal 2027, meaning that its core financial segment and related add-ons will need to do more to get to the company's long-term target of $10B. 
"Given the outsized impact that new business signed this year has on revenue in later years, lower-than-expected [fiscal 2023] revenue growth would put Workday's goal of sustainable 20% subscription revenue growth and $10 billion of total revenue by [fiscal 2026] at risk," DiFucci added.
And given the broader economic environment, which looks to be softening and possibly already in a recession, DiFucci noted that Workday (WDAY) has already started to see some softness. 
"Management dismissed the macro influence of the slippage of two very large deals at the time, but itâs become clearer to us since then that the impending slowdown was neither temporary nor company specific," DiFucci explained, adding that any slowdown will not be "transitory" as it was the last time. 
Last month, Workday (WDAY) said it achieved FedRAMP Authorized status for its Workday Government Cloud.