Workday Stock Retreats After Disappointing Margin Forecast

So far, at least 10 brokerage firms have hiked their price target on Workday stock

Managing Editor
Sep 5, 2018 at 9:40 AM
facebook twitter linkedin

The Coca-Cola Co
The Coca-Cola Co
The Coca-Cola Co
The Coca-Cola Co
The Coca-Cola Co

Shares of Workday Inc (NASDAQ:WDAY) are down 5% at $148.90 in early trading, after the company lowered its full-year adjusted operating margin forecast by 3 percentage points. However, the software concern also posted second-quarter earnings and revenue beats, drawing a slew of analyst bull notes.

Specifically, no fewer than 10 brokerage firms hiked their price target on Workday stock, the most notable from Canaccord Genuity and Monness Crespi Hardt to $175 -- with the former saying the stock is one "growth investors could just BUY and put away." Not far behind was one to $174 at Oppenheimer. Overall analyst sentiment had been split coming into today, with 16 of 30 covering firms sporting "hold" or "strong sell" recommendations.

The tech stock has been soaring up the charts, just yesterday touching a fresh record high of $157.12. WDAY has gained over 56% since its early December lows, thanks to several sharp bounces off its 180-day moving average. Against this backdrop, it seems a near-term pullback may have been in the cards for Workday stock. The security sported a 14-day Relative Strength Index (RSI) of 83 at last night's close -- well into overbought territory.

Digging into options, traders have been leaning bullish toward Workday during the past two weeks. This is per the stock's 10-day call/put volume ratio of 2.58 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 80th annual percentile. In other words, calls have been purchased over puts at a faster-than-usual clip.

Should the security resume its longer-term uptrend, shorts may be forced to cover. The 13.5 million WDAY shares sold short accounts for roughly 9.3% of the stock's total available float. At the equity's average pace of trading, it would take shorts almost two weeks to buy back their bearish bets.

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Schaeffer's Daily Bulletin Offer


Special Offers from Schaeffer's Trading Partners