Workday price target raised to $255 from $240 at Oppenheimer

Oppenheimer analyst Ray McDonough raised the firm’s price target on Workday to $255 from $240 and keeps an Outperform rating on the shares. While investor expectations for Workday’s shares have increased after a significant move up in the company valuation recently, the firm expects positive reported results for Q2 with upside to the consensus subscription backlog estimate and higher profit margins. Oppenheimer’s research mosaic points to solid deal activity, top-of-funnel momentum, rising engagement levels, and good defensibility for Workday’s solutions, which remain priority investments in the current enterprise business cost optimization cycle. Negatively, the backlog growth metrics will be challenged by the effects of a difficult year-over-year comparison in Q2 and, in the firm’s view, Workday’s market positioning in Generative AI’s future is underappreciated by investors. However, this perspective may change with greater transparency on Workday’s AI opportunities arriving next month at the Investor Day/Rising conference.