Freedom Broker downgrades Workday stock rating on valuation concerns

Freedom Broker has reduced its rating on Workday (NASDAQ:WDAY) stock from "Buy" to "Hold" due to valuation concerns, despite the company's strong operational performance. Analyst Almas Almaganbetov upgraded the price target to $200 from $180. Workday delivered solid second-quarter fiscal 2027 results, surpassing expectations with total and subscription revenue.

The company's gross profit margin is impressive at 75.8%, and revenue grew 13.35% year-over-year. However, delayed financial returns due to early adoption and promotional Flex Credits impacted subscription backlog growth. Freedom Broker anticipates subscription revenue deceleration in the second half of fiscal 2027 and fiscal 2028 due to a mix shift in bookings.

The firm raised its operating margin forecast based on the company's cost management performance. Workday announced a new $4.0 billion share repurchase authorization. Despite valuation concerns, the stock remains undervalued according to InvestingPro analysis. Analysts note the company's dual-class share structure and strong free cash flow, making a private equity buyout unlikely.

Workday has seen adjustments in stock price targets following its latest earnings and guidance updates.