Workday (WDAY) Stock Forecast & Price Target

Workday's positive outlook is supported by significant revenue growth, with approximately 60% of this growth sourced from existing customers, reflecting strong cross-selling opportunities. The company's total addressable market (TAM) has also expanded dramatically by 18%, indicating a growing demand for its enterprise solutions. Additionally, Workday is expected to increase operating margins by nearly 1,000 basis points from FY23 to FY26, showcasing efficient financial management alongside robust growth in subscription revenues for its human capital management and financial management solutions.

Workday faces a challenging outlook due to potential customer retention issues stemming from its competitive position and operational concerns within its target market. The company has recently revised its subscription revenue growth guidance downward, indicating a decline from 15% to approximately 13% for FY27, while facing significant risks related to underperformance in large enterprise deals and international markets. Additionally, despite a projected free cash flow margin of 31-32% by FY28, the possibility of reduced traction in key areas suggests that future growth prospects may be compromised, further contributing to a cautious sentiment regarding the stock.