10 Best Enterprise Software Stocks to Buy Now

03. Workday, Inc. (NASDAQ:WDAY)

Average Analyst Share Price Target Upside: 20.58%

Average Analyst Share Price Target: $279.22

Workday, Inc. (NASDAQ:WDAY) offers a cloud-based suite for HR and financial management aimed at large enterprises. Workday, Inc. (NASDAQ:WDAY) has an average analyst price target of $279.22, suggesting a potential upside of 20.58%. The company is investing heavily in AI and machine learning to strengthen its market position. Although Workday, Inc. (NASDAQ:WDAY) growth rate has slowed from previous years, it still expanded revenue by 16% year over year in the latest quarter. As the company scales, its growth is naturally decelerating, but it is achieving impressive results in other financial areas. The gross margin is increasing as more revenue comes from high-margin subscription services compared to lower-margin professional services. Effective expense management has led to profitability, and free cash flow is rising.

Workday, Inc. (NASDAQ:WDAY) role as a critical partner for many large businesses creates high switching costs, giving it a strong economic moat. Analysts believe that despite the stock’s forward P/E ratio of just under 40, its projected 30% annual earnings growth over the next five years suggests an appealing investment. The PEG ratio stands at 1.3, indicating potential for attractive returns even if it’s not a bargain. As of August 15, Oppenheimer has reaffirmed its positive view on Workday, Inc. (NASDAQ:WDAY), maintaining an Outperform rating with a price target set at $300. This optimistic stance is driven by Workday’s solid performance in the Financial Industry Sector (FINS) and potential for improved profit margins.

Polen Global Growth Strategy stated the following regarding Workday, Inc. (NASDAQ:WDAY) in its Q2 2024 investor letter:

“The largest absolute detractors were Workday, Inc. (NASDAQ:WDAY), Paycom Software, and Aon. In line with broader weakness across the enterprise software complex, Workday sold off more than 15% as management guided to organic subscription sales growth in the range of 16.6-17%, 50bps lower than previously guided. Zooming out longer term, we believe nothing has fundamentally changed for Workday. According to our research, it remains a solid, market-leading, long-term compounder with a substantial runway for future growth in the market for both its human capital management and financial software.”