On Wednesday, Deutsche Bank maintained a Hold rating on Workday (NASDAQ:WDAY) with a consistent price target of $275.00. Following Workday's Financial Analyst Day, the firm's perspective on the company's stock remains unchanged.
The management team at Workday confirmed their medium-term targets, which align with prior expectations. These targets include approximately 15% growth in subscription revenue and around 30% non-GAAP operating margins. Additionally, a new goal was set for a free cash flow margin of about 30%.
During the event, Workday's management expressed confidence in achieving the 15% growth target. This optimism is based on a combination of new customer acquisitions and expanding business with existing clients. Workday's strategy involves leveraging opportunities in artificial intelligence, financial management solutions, international expansion, and partnerships. The company showed particular enthusiasm for its partner ecosystem, the Asia-Pacific-Japan (APJ) market potential, and the mid-sized enterprise segment.
However, there was a noted decrease in expectations for the large enterprise segment of Workday's financial management solutions. The event focused more on promising prospects in the mid-sized enterprise and industry-specific solutions. Despite this, concerns regarding the company's ability to meet revenue growth targets persist, especially given the faster deceleration in year-over-year growth rates for financial management solutions compared to human capital management (HCM).
Deutsche Bank's analysis suggests that while growth is likely to continue at a mid-teen rate for several years, in line with Gartner (NYSE:IT)'s forecast for the SaaS ERP market, there are no significant changes expected in investor sentiment post-event.
The firm believes that Workday's margin progression will not compromise future revenue growth, given the operational efficiencies and leverage in the company's business model. The $275 price target represents a 29x enterprise value to calendar year 2025 free cash flow (EV/CY25 FCF) multiple.
InvestingPro Insights
InvestingPro data highlights Workday's (NASDAQ:WDAY) strong financial position and market performance. The company boasts a robust market capitalization of $65.48 billion, indicating its significant presence in the industry. Workday's P/E ratio stands at 42.59, reflecting investor confidence in its earnings potential, with an adjusted P/E ratio for the last twelve months as of Q2 2025 at 41.86. This is further supported by a substantial revenue growth of 17.07% over the same period, demonstrating the company's ability to expand its financial top line.
The gross profit margin for Workday is particularly impressive at 75.77%, underscoring the company's efficiency in maintaining profitability in its operations. Additionally, Workday's EBITDA growth is noteworthy, with an increase of 183.45% for the last twelve months as of Q2 2025. This suggests a strong operational performance and potential for continued profitability.
InvestingPro Tips for Workday emphasize the company's liquidity and market valuation. Workday holds more cash than debt, providing financial stability and flexibility. Furthermore, 25 analysts have revised their earnings upwards for the upcoming period, indicating positive sentiment about the company's future performance. With more tips available on InvestingPro, including insights on valuation multiples and profitability, investors can gain a comprehensive understanding of Workday's investment potential.
For those interested in a deeper dive into Workday's financial health and market standing, additional InvestingPro Tips are available, providing valuable insights for informed investment decisions.
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