Workday: Sets Targets for 2027 That We Think Are Too Conservative; Reiterate $245 Fair Value

Workday’s shares plummeted 7% after hours upon analyst day 2027 targets revealed today, which came in under our and the market's expectations. However, we think that Workday is exercising substantial caution in its targets—especially when it comes to non-GAAP operating margins, as we see all the right levers to push profitability momentum ahead. In positive news, the afterhours drop brings the former 3-star stock into attractive 4-star territory—giving long-term investors a window of opportunity for exposure to this wide-moat name. We reiterate our $245 fair value estimate as well as our belief that Workday is well-positioned to benefit from the massive base of SAP and Oracle enterprise resource planning, or ERP, customers yet to migrate to cloud solutions.