Software maker Workday saw its stock price drop more than 8% after the company revised its subscription revenue growth outlook for the next three fiscal years. The company now expects growth in the range of 17% to 19%, down from its previous target of 20%. Workday’s lower outlook led to investor disappointment, but analysts believe the company’s new management team is making the right strategic moves and that the revised targets will prove to be conservative. Workday has recently undergone changes in its management team, including appointing a new CFO and transitioning one of its co-CEOs to become the sole CEO in 2024.
During Workday’s analyst day, the company highlighted its focus on artificial intelligence and international expansion. Analysts believe that while the lowered margin targets are not ideal, Workday is implementing various new go-to-market initiatives, especially internationally, that require time and investment to yield results. The company’s new CFO prefers conservatism and optionality to ensure sustainable growth. Workday’s stock had previously gained almost 38% in 2023, and it holds a Relative Strength Rating of 91 out of 99.
Despite the stock’s decline, analysts have expressed confidence in Workday’s new management team and believe that the company is well-positioned for future growth. Workday will continue to invest in artificial intelligence, financial software, and international expansion, with its margin guide being seen as a floor rather than a ceiling. Overall, the market remains optimistic about Workday’s potential.