2 Software Stocks Suffering Steep Slides After Earnings

Autodesk (ADSK) is trading lower despite a Q1 earnings and revenue beat and raised full-year guidance, prompting at least 11 analysts to raise price targets, including Morgan Stanley to $370. Workday (WDAY) shares are down following a Q1 earnings and revenue beat, overshadowed by a disappointing subscription revenue outlook; J.P. Morgan reiterated its "overweight" rating while six other analysts cut their price targets on the stock, sending options volume soaring to 20 times the average daily volume.

Analysis

Autodesk Inc. (ADSK) and Workday Inc. (WDAY) are experiencing divergent market reactions despite both reporting first-quarter earnings and revenue beats. ADSK, after an initial pop, traded down 0.3% to $294.03, even with a hiked full-year guidance and no fewer than eleven brokerage firms raising their price targets, including Morgan Stanley's significant upward revision to $370 from $330. Although ADSK has slipped below its year-to-date breakeven, it remains 37% higher year-over-year, with options volume surging to 12 times the daily average, indicating heightened investor interest, particularly in call options like the weekly 5/30 300-strike. Conversely, WDAY shares plummeted 10.8% to $242.48, marking a potential worst single-session drop since May 2024, driven by a disappointing subscription revenue outlook that overshadowed its positive earnings. This negative guidance led to six analysts slashing price targets, despite J.P. Morgan Securities reiterating an "overweight" rating and two other modest price target increases. WDAY is now down 6.4% year-to-date, with its options volume exploding to 20 times the average, showing a tilt towards puts with 13,000 traded versus 10,000 calls, highlighting significant bearish sentiment.

Key Decisions for Investors

• For Autodesk (ADSK), the disconnect between strong fundamentals, positive analyst revisions, and the modest share price pullback might present a strategic entry point for investors confident in its upgraded full-year guidance, though heightened options activity signals potential near-term volatility.
• Investors should exercise caution with Workday (WDAY) due to the significant impact of its weakened subscription revenue outlook, which has prompted substantial selling pressure and analyst downgrades despite a headline earnings beat; closely monitor future subscription revenue guidance for signs of stabilization.
• The substantial increase in options volume for both ADSK and WDAY indicates a period of heightened market scrutiny and potential price volatility, suggesting traders should be prepared for continued sharp movements and consider risk management strategies.