On Thursday, Loop Capital, a financial services firm, adjusted its stock price target for Workday (NASDAQ:WDAY), a leading provider of enterprise cloud applications for finance and human resources. The new price target is set at $270, up from the previous $255, while the firm retains a Hold rating on the stock.
According to Loop Capital, the adjustment stems from an expectation that Workday will report a 12-month subscription backlog growth aligned with the company's and analysts' forecasts, as well as guidance in the range of 14-15% year-over-year growth. The company is also anticipated to provide fourth-quarter guidance that is in line with its previously projected subscription revenue growth of 15-17%.
The recent evaluation by Loop Capital follows Workday's revision of its future subscription revenue growth targets. On the last earnings call, which took place for the second fiscal quarter, Workday adjusted its fiscal years 2026 and 2027 subscription revenue growth to around 15%, a decrease from the previously projected 17-19% compound annual growth rate issued just a year prior.
In response to the revised growth expectations, Workday has signaled an intention to expedite its non-GAAP operating margin expansion. The company now aims for a 30% operating margin in fiscal year 2027, an increase from the earlier goal of over 25%, set approximately a year ago.
Workday is scheduled to announce its third fiscal quarter results after the market closes on November 26th, a Tuesday. Loop Capital's revised price target is partly based on higher cash flow estimates for Workday in the outer years, particularly beyond fiscal year 2027.
In other recent news, Workday Inc (NASDAQ:WDAY). reported a 17% rise in subscription revenue, reaching $1.903 billion, and adjusted its revenue growth forecast to 15%. The company also set ambitious financial targets for fiscal 2027, including a 34% operating cash flow margin and a 30% free cash flow margin.
Analyst firms Goldman Sachs and Oppenheimer have expressed confidence in the company's performance, with Goldman Sachs increasing its price target for Workday from $300 to $305 and maintaining a Buy rating.
Workday also announced a series of strategic moves, including the acquisition of Evisort, an AI-powered contract management platform, and the launch of four new AI agents: Recruiter, Expenses, Succession, and Workday Optimize. Moreover, Workday Ventures, the company's strategic capital arm, has invested in 10 new AI companies aiming to enhance productivity and decision-making in the workplace.
In terms of leadership changes, Doug Robinson, Co-President of Workday, will retire in 2025 after a 14-year tenure, continuing to serve as an Advisor until April 30, 2025. Rhonda J. Morris, Chevron Corporation (NYSE:CVX)'s vice president and chief human resources officer, has been appointed to Workday's Board of Directors, effective early 2025. These are among the recent developments at Workday.
InvestingPro Insights
To complement Loop Capital's analysis, InvestingPro data offers additional insights into Workday's financial position. As of the last twelve months ending Q2 2025, Workday reported impressive revenue of $7.86 billion, with a robust gross profit margin of 75.77%. This aligns with one of the InvestingPro Tips highlighting Workday's "impressive gross profit margins."
The company's strong financial health is further evidenced by its market capitalization of $72.97 billion and a P/E ratio of 47.34. While this P/E ratio suggests that Workday is "trading at a high earnings multiple," as noted in another InvestingPro Tip, it's important to consider this in the context of the company's growth prospects and industry position.
Investors should note that Workday has shown strong recent performance, with a 24.08% price return over the last three months. This momentum is reflected in the InvestingPro Tip indicating a "strong return over the last three months."
For those seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Workday, providing a deeper understanding of the company's financial health and market position.
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