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Deutsche Bank downgrades Workday to Hold on valuation concerns
Workday is trading at more than 38x forward earnings, and Deutsche Bank cited a seasonal tendency for the stock to fall in September.
Workday shares have rallied sharply since late June, but Deutsche Bank urged investors to temper expectations, downgrading the Nasdaq listed cloud software name to Hold. The bank said the move is driven primarily by valuation, not by signs of operational decline.
In its view, Workday’s shares now reflect a more balanced risk reward after a substantial re rating, even as the firm kept a $220 price target that still implies more than 15% upside from current levels. Deutsche Bank pointed out that Workday trades at more than 38x forward earnings, making it more expensive than enterprise software peers such as Salesforce and Adobe, and it does not pay a meaningful dividend to offset the valuation debate.
The note also highlighted seasonality, saying Workday has a history of dropping more than 3.5% on average in September, which it expects to weigh on the stock’s near term appeal. Deutsche Bank further noted that market chatter about possible interest from Silver Lake could fade if acquisition discussions do not progress to an official deal.
Finally, Deutsche Bank tied its stance on higher multiples to the early stage of Workday’s AI products and automated agents, despite CEO leadership changes that it said have helped morale. It expects institutions to seek clearer, tangible evidence that AI integrations sustainably contribute to net revenue before assigning a higher standalone valuation to the stock.
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