Workday Stock Is 'Undervalued,' Poised For Growth: Analyst

Core Insights - Workday, Inc (NASDAQ:WDAY) demonstrates strong deal momentum, particularly in commercial, healthcare, and financial services sectors, leading to a maintained Buy rating with a price target of $265 [1][2]. Group 1: Financial Performance - The analyst projects a 16.5% growth in current remaining performance obligation (cRPO) for the third quarter, with a similar expectation of 15.5% growth for the fourth quarter year-over-year [3]. - Anticipated margins for the third quarter and fiscal 2026 are 28% and 28.9%, respectively, with expectations of a beat-and-raise quarter as the company aims for a 35% operating margin by fiscal 2028 [3][4]. Group 2: Market Trends and Demand - There is a noted increase in demand for human capital management (HCM) solutions, including add-on products like Extend and talent-acquisition tools, alongside improving trends in Europe [2][4]. - The company is expected to achieve solid free cash flow growth, alleviating earlier investor concerns regarding AI disruption and growth targets [4][5]. Group 3: Long-term Outlook - Workday's updated long-term goals of 12% to 15% revenue growth and 35% margins support a credible free cash flow growth model, with potential for multiple expansion as the stock trades at 14 times calendar 2027 free cash flow [5]. - The company is positioned for healthy growth through international expansion, mid-market wins, and platform deals, which are expected to enhance investor confidence [6].