Workday stock price target lowered to $225 from $250 at DA Davidson

Workday (NASDAQ:WDAY) reported a robust Q2 earnings beat, with non-GAAP EPS of $2.21 and revenue of $2.35 billion, yet its shares declined after-hours due to cautious or effectively unchanged forward guidance for H2 FY26. This outlook prompted multiple firms, including DA Davidson and BMO Capital, to lower price targets despite maintaining generally positive long-term views on the company's market position.

Analysis

Workday (WDAY) presents a mixed signal for investors, characterized by a strong fiscal second-quarter 2026 performance that was overshadowed by a cautious forward outlook. The company surpassed analyst expectations with non-GAAP EPS of $2.21 against a $2.11 forecast and delivered revenue of $2.35 billion, marking a 13% year-over-year increase. Key operational metrics remained robust, including 14% growth in subscription revenue and healthy operating margins of 29%. Despite these positive results, the stock declined in after-hours trading due to management's effectively unchanged guidance, which implies a weaker growth trajectory for the second half of the fiscal year. This has triggered a series of price target reductions from Wall Street analysts, including DA Davidson (to $225), BMO Capital (to $285), and BofA Securities (to $265), who cited the cautious outlook and broader macroeconomic concerns as primary drivers for their adjustments. While most firms, such as Goldman Sachs and JMP Securities, maintain 'Buy' or 'Outperform' ratings, their revised targets reflect tempered near-term expectations, indicating that the market is currently prioritizing future growth visibility over past performance.

Key Decisions for Investors

• Investors should scrutinize management's commentary on the second-half fiscal 2026 outlook, as the implied deceleration is the primary catalyst for the negative stock reaction and analyst price target cuts, not the solid Q2 earnings.
• The divergence between strong current fundamentals, such as 14% subscription revenue growth, and the cautious guidance suggests it may be prudent to wait for more definitive signs of revenue re-acceleration before considering the stock's pullback a buying opportunity.
• Note that while multiple firms lowered price targets, most maintained 'Buy' or 'Outperform' ratings, indicating a belief in the long-term thesis but with a reset of near-term valuation expectations due to macroeconomic headwinds.