Workday Stock Plunges After EPS Miss, Goldman Sachs Sees a 'Great Buying Opportunity'

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By Senad Karaahmetovic

Shares of Workday (NASDAQ:WDAY) are down more than 8% in premarket trading Friday after the company reported worse-than-expected adjusted Q1 EPS.

Workday posted Q1 adjusted EPS of 83c, compared to 87c in the year-ago period and below the analyst consensus of 85c per share. Revenue came in at $1.43 billion, up 22% YoY and in line with the analyst estimates. Subscription revenue stood at $1.27 billion, up 23% YoY and in line with the expectations.

Looking ahead, WDAY expects Q2 revenue in the range of $1.35 billion to $1.36 billion, while analysts were looking for $1.35 billion.

For the full year, the software company expects subscription revenue in the range of $5.54 billion to $5.56 billion, up from the previous forecast of $5.53 billion to $5.55 billion, with analysts also expecting $5.55 billion.

“We had a solid start to the year, as organizations across the globe continue to choose Workday as their strategic finance and HR partner,” said CFO Barbara Larson.

Goldman Sachs analyst Kash Rangan lowered the price target to $260.00 per share from $300.00

“Acknowledging the uncertain macroeconomic backdrop head-on will likely serve as a net positive, in our view, as estimates are de-risked and management can execute against a more conservative playbook… We look beyond the near-term noise and see a great buying opportunity for a high-quality franchise. We also note that periods of slower growth tend to last only several months, giving room to the possibility that Workday sees close-rates pick up in 2H,” Rangan told clients.

KeyBanc analyst Michael Turits cut the price target to $207.00 per share from $229.00 after a “modest” beat.

“While mgmt is confident in closing the pushouts this year, we slightly lower our FY23E revs. and model to the low end of guidance given the cRPO miss and macro uncertainty. Lowering PT to $207 given 1Q results and risk around back office demand in a weakening macro, but retain confidence around the relative strength of the business and conviction in multiple LT catalysts in both cloud HCM and Fins as we wrote post a recent NDR,” Turits said in a note.