UBS suggests that Workday, which includes financial management software and human resources, could be hard hit by an economic downturn. UBS has downgraded Workday’s rating to neutral, from buy. UBS also reduced its target price for the stock from $185 to $275. This target was set at 5% higher than Workday’s Monday close. Karl Keirstead, UBS’s chief economist, said Monday that Workday shares do not fully reflect the possibility that back-office finance/HR projects could be delayed by a downturn. Keirstead stated, “The obvious tone down in this round was the belief that macro’s were now weighing upon customer demand. It was also the consensus opinion that, in the event that the economy recedes, large, back office application software deals will likely be delayed more than other.” The stock is down 35.6% this year, underperforming the S & P 500’s 15.9% decline in 2022. Even after Workday’s downturn, UBS said that the stock’s valuation is still high: “We aren’t sure the valuation premium to Salesforce. Microsoft. Adobe makes sense.” UBS expects positive, but not overwhelming results in Workday’s quarterly report due out later this month. —CNBC’s Michael Bloom contributed reporting.
