Workday stock forecast ahead of earnings: buy, sell, or hold?

Workday stock will be in the spotlight on Thursday as the blue-chip software company publishes its financial results, which will provide the management an opportunity to comment on the acquisition rumors. WDAY was trading at $194 on Wednesday, down modestly from the year-to-date high of $227.

Workday earnings to provide color on its growth

Workday is a top software company providing firms with solutions in the human resource, finance and accounting, legal, and planning industries. It is used by thousands of companies, including the top ones in the Fortune 500.

The company’s business has experienced strong revenue growth in the past few years, driven by the rising demand for its services from enterprise customers. Its annual revenue jumped from $5.13 billion in 2022 to over $9.5 billion last year. 

Recently, however, the stock has tumbled in the past amid concerns that AI tools will disrupt its business. These fears rose after IBM published its financial results, which showed that clients were focusing on hardware.

Workday will now have a chance to demonstrate that its business is growing when it releases its financial results on Thursday. Yahoo Finance data shows that the revenue is expected to jump by 12.2% to $2.64 billion, with earnings per share rising from $2.21 to $2.61. Workday has a long record of beating analysts estimates, meaning that the trend may continue

The most recent results showed that Workday’s revenue jumped by 13.5% in the first quarter to $2.54 billion, with its operating income rising by 13.3% to $338 million. In his statement, the CEO said:

"We are reiterating our fiscal 2027 subscription revenue outlook of $9.925 billion to $9.950 billion, while increasing our fiscal 2027 non-GAAP operating margin guidance to 30.5%. Our focus remains on executing on our agentic AI roadmap while driving operational efficiencies as we scale."

The upcoming earnings report may give the company more insights into the recent acquisition rumor. Reuters reported that Silver Lake was considering an acquisition. If this happens, it would be one of the biggest acquisitions in the software industry since the company has a market capitalization of over $48 billion. 

Workday’s valuation is relatively friendly as it trades with a forward price-to-earnings ratio of 18. Its foreward PEG ratio is 0.85, which is lower than the technology sector median of 1.22.

Workday stock price technical analysis

WDAY stock chart | Source: TradingView

The daily chart shows that the WDAY stock bottomed at $110, its lowest level in April and June this year. It moved above the important resistance level of $158.27, its highest level on June 1 this year. 

The stock has formed a golden cross pattern, which is a common bullish reversal sign in technical analysis. Therefore, there is a likelihood that the stock will continue rising, potentially to the year-to-date high of $228. A move above that level will point to more gains, potentially to $250.