Workday (WDAY) Stock Forecast & Price Target

Workday's revenue growth is increasingly driven by its existing customer base, which now contributes approximately 60% of growth, reflecting a significant increase from 50% in the previous year due to robust cross-selling efforts. The total addressable market (TAM) has expanded considerably, growing 18% to over $160 billion, indicating strong potential for continued growth in its offerings. Moreover, Workday is projected to achieve substantial improvements in operating margins, increasing by nearly 1,000 basis points from FY23 to FY26, while its subscription revenue for human capital management and financial management solutions demonstrate noteworthy growth rates of 13% and 20%, respectively.

Workday's outlook is hindered by potential customer retention challenges stemming from possible losses in competitive positioning and operational issues, which could impact its growth. Additionally, the company has lowered its near-term subscription revenue growth guidance, indicating a decline from previous expectations, which raises concerns about its performance in large enterprise deals and international markets. While there is an optimistic view on margin improvement and free cash flow growth, the underlying risks and adjustments in revenue projections present a negative sentiment for Workday's stock.