Needham reiterates Buy rating on Workday stock despite modest quarter

Investing.com - Needham maintained its Buy rating and $300.00 price target on Workday (NASDAQ:WDAY), currently valued at $60.76 billion, following the company’s second-quarter financial results. According to InvestingPro data, analyst targets range from $220 to $340, reflecting mixed sentiment on this prominent software industry player.

The enterprise software provider reported financial results that slightly exceeded consensus estimates, with 16.3% current remaining performance obligation (cRPO) growth coming in above guidance. This performance aligns with the company’s robust 14% revenue growth over the last twelve months. Needham attributed this beat primarily to early renewals rather than increased demand.

Mid-Enterprise and European markets outperformed for Workday, suggesting sluggish performance in the U.S. Enterprise segment given the minimal upside to cRPO figures. The research firm expects Workday shares to face modest weakness following the earnings report. InvestingPro analysis reveals 12 additional key insights about Workday’s financial health and market position.

Management effectively guided fiscal year 2026 revenue to remain flat after accounting for the Paradox acquisition, despite an $8 million beat in the current quarter, implying an $8 million reduction to second-half revenues.

Workday continues its significant investment in artificial intelligence with the announced $1 billion acquisition of Paradox AI, which Needham views favorably despite estimating the purchase at approximately 16 times revenue. Paradox offers a natural language-based recruiting solution for frontline workers.

In other recent news, Workday has seen several adjustments in stock price targets from various analyst firms following its second-quarter earnings report. Despite delivering a modest revenue beat and showing solid expense execution, analysts have expressed cautious outlooks. Stifel lowered its price target for Workday to $255, citing a lack of acceleration in the company’s business momentum. DA Davidson also reduced its target to $225, noting that the earnings report beat expectations but came with unchanged forward guidance. BMO Capital adjusted its target to $285, highlighting a continuation of existing trends amidst an uneven macroeconomic environment. Goldman Sachs decreased its target to $280, despite Workday’s subscription revenue growth of 14% and operating margins of 29%, due to implied lower guidance for the second half of fiscal 2026. Lastly, BofA Securities lowered its target to $265, acknowledging that Workday’s current remaining performance obligations growth exceeded expectations by 2.4%. These developments reflect a mix of cautious optimism and concern over future guidance.

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