Workday
stock was sinking Thursday after the human-resources technology provider cut its forecast for annual growth in subscription revenue, citing an “uncertain” economic environment.
Workday
(ticker: WDAY) said at an investor day Wednesday that it now expects annual subscription revenue growth to be between 17% and 19% over the next three years, down from previous estimates of 20%-plus.
“For 18 months we’ve been talking about going into a recession. For 18 months, we’ve been talking about a soft landing, a hard landing. We’ve been talking about all these macro challenges and we’re taking that into account, because we don’t see that changing in the near future,” Co-Chief Executive Officer Carl Eschenbach said on a call with investors.
Eschenbach was appointed to the role in December.
Shares of
Workday
were down 7.9% Thursday to $212.61, putting them on track for their largest percentage decrease since November 2020. A closing price at that level would be the lowest since June, according to Dow Jones Market Data.
“We think the updated targets reflect a new management team lowering the bar in an uncertain macro,” Needham analyst Scott Berg wrote in a research note Thursday. He rates the stock as a Buy with a target of $250 for the price.
William Blair analyst Matthew Pfau had a similar take, saying in a research note that he believes the new co-CEO and CFO wanted to put out targets that are achievable regardless of economic conditions.
“There is a good chance that there could be upside to the subscription guidance range if the macro improves and growth investments (e.g., international, financials, partners, and AI) generate their expected returns,” Pfau said. He rates the stock as Outperform with no price target.
“We continue to feel good about our investment thesis on Workday and see a potential sell-off as a good opportunity for investors that missed the stock earlier in the year,” Pfau wrote.
Shares of Workday have climbed 27% in 2023.
Write to Angela Palumbo at [email protected]
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