Workday gets downgraded to hold as analyst expects cycle to favor lagging software names

Workday Inc.’s stock got downgraded by Deutsche Bank Monday on the belief that it has benefitted from recent tailwinds and that other software names are positioned for a recovery in the second half of the year.

In a note Monday, Deutsche Bank analyst Brad Zelnick downgraded Workday
to hold from a buy and reduced his price target to $195 from $215.

“We believe Workday has benefitted from several tailwinds including what is now well acknowledged to be a back-office apps cycle beginning sometime mid-2021,” Zelnick said.

The analyst stressed that the downgrade was not related to the fourth quarter but had a 12-month time horizon.

Zelnick he sees Workday at risk when front-office application software names that lagged in 2022 like Salesforce Inc.
ZoomInfo Technologies Inc.
and HubSpot Inc.
bounce back in 2023. The analyst also said “concerns may materialize” ahead of fiscal 2025 when Workday is expected to see weaker renewals.

Of the 40 analysts who cover Workday, 30 have buy ratings, nine have hold ratings, and one has a sell rating, along with an average target price of $204.86, according to FactSet data.

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