Morgan Stanley cuts Workday stock rating on growth concerns

Investing.com -- Morgan Stanley downgraded Workday Inc (NASDAQ: WDAY) to 'Equal-Weight' from 'Overweight,' citing concerns over slowing growth and the effectiveness of recent go-to-market investments.

With consensus expectations have steadily declined over the past two years, Morgan Stanley (NYSE: MS) questions where growth will bottom.

While Workday maintains a large market opportunity and strong retention rates, Morgan Stanley sees increased risks, including an 8.5% workforce reduction and continued subscription growth forecast cuts.

“Recent investments in distribution have failed to catalyze topline growth at Workday,” analyst said.

The firm also notes that recent investments in distribution and sales have failed to drive overall topline acceleration, despite some progress in financial software adoption and cross-selling.

Additionally, broader enterprise software weakness, macroeconomic uncertainty, and muted channel sentiment have raised concerns about Workday's near-term growth trajectory. Morgan Stanley lowered its price target from $330 to $275, reflecting downward pressure on valuation as growth continues to decelerate.

“The recent string of weak enterprise software Q4 prints, softening channel conversations, and multiple compression risk add more near-term weights to our views on the shares,” analyst at Morgan Stanley added.

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