Citizens downgrades Workday on CEO reset, risks to growth outlook

Investing.com -- Citizens downgraded Workday to Market Perform from Market Outperform, saying founder Aneel Bhusri’s return as chief executive may require time and investment to reset the company’s product strategy as competition in AI intensifies.

The brokerage cited the February 8 announcement that Mr. Bhusri would resume the CEO role, alongside a preannouncement of fourth-quarter results that were “in line with its guidance.”

Shares of Workday have fallen 33% year to date, compared with roughly flat performance for the S&P 500 and Russell 3000. Shares were down 1% at $141 on Wednesday premarket trading, trading at 2.9x 2027 estimated enterprise value to revenue and 8.4x enterprise value to free cash flow, below the large-cap technology peer median, which analysts said reflects management changes and increased competition.

Citizens said it supports Mr. Bhusri’s return, noting his experience dating back to PeopleSoft and his ability to accelerate product development and AI innovation. However, the firm outlined several near-term risks.

First, it said Mr. Bhusri may need time to get the product engine positioned to support a shift from the SaaS era to what it called the AI era. Second, while fourth-quarter results were preannounced in line with guidance, Citizens warned that full results could disappoint investors on closer review. Third, the company did not reiterate its fiscal 2027 subscription revenue growth target of 13% in its Form 8-K, raising concern that updated guidance could fall short of expectations.

The brokerage also pointed to rising competition in agent orchestration, citing offerings such as ServiceNow Control Tower from ServiceNow, Microsoft Agent 365 from Microsoft, and Frontier from OpenAI.

Citizens maintained its fourth-quarter non-GAAP EPS estimate of $2.35 on revenue of $2.52B and its fiscal 2027 EPS estimate of $10.70 on revenue of $10.7B. It cut its fiscal 2028 EPS forecast to $12.72 from $13.13.

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