Workday heads into its August 25 earnings date carrying an awkward split: short sellers are rushing for the exit while one of Wall Street's most-watched analysts just moved to the sidelines.
The most striking development this week is the analyst action. Morgan Stanley's Keith Weiss downgraded Workday to Underweight on July 21, cutting his target from $185 to $145 — a bearish move from a bellwether firm that carries real weight given the stock is currently trading at $135.34. CLSA piled on the same week, initiating with an Underperform and a $92 target. That $92 figure looks notably aggressive relative to the consensus mean of $168.63, though it signals at minimum that new coverage is arriving with a sceptical lens. The broader analyst picture remains nominally constructive — 18 buy ratings and a consensus of "buy" — but the direction of travel on targets has been downward since May, when Goldman cut its target to $151 from $206, and several firms held neutral-to-hold ratings with targets clustering in the $139–$151 range. Bulls point to AI-driven product expansion, SaaS margin improvement, and above-consensus Q1 results. Bears counter that the valuation still prices in considerable execution in ITSM and adjacent categories where Workday's product depth is unproven.
Short interest tells a contrasting story. Shorts have been actively covering. SI dropped 11.7% in a single session on July 24 and is off 10.8% on the week, bringing the position to 12.3% of the free float — still elevated in absolute terms but falling from recent highs above 12.8%. That covering has coincided with the stock's 5.8% single-day bounce on July 24, suggesting at least some of the price move reflects mechanical short-covering rather than fresh long conviction. The borrow market reflects no squeeze pressure: availability is running at roughly 5x the current short interest, meaning there is ample lending supply for anyone still wanting to build a position on the short side. Cost to borrow is just 0.53% — near its one-month low — consistent with a well-supplied lending market. The ORTEX short score has eased to 59.6 from 61.4 earlier in the week, moving in the direction of less bearish pressure.
Options positioning has turned more defensive than usual. The put/call ratio closed July 24 at 1.17, almost two standard deviations above its 20-day average of 1.03 — a reading that has only been this elevated once in the past year, when the ratio hit its 52-week high of 1.65. Puts have outweighed calls for most of the past two weeks, a shift from the more balanced positioning seen through June. With earnings five weeks out on August 25, it is consistent for protection-buying to build — but the timing, arriving precisely as the Morgan Stanley downgrade landed, gives the options signal added weight.
On the ownership side, founder David Duffield sold roughly $12.5 million in shares on July 9 across multiple tranches. His 36.6 million shares still represent 14.8% of the company, and the trades look more like routine distributions than a directional statement. BlackRock added 846,000 shares through June 30, and Hotchkis & Wiley has been building a meaningful position, adding nearly 3.9 million shares through May. Value-oriented managers accumulating while a growth-oriented sell-side firm downgrades captures the current tension in the ownership base rather well.
The past two earnings prints show a split personality: a 6% drop on the day in June followed by an 11% slide over five days, but a more orderly 1.2% gain on the day in May with a contained 2.7% five-day follow-through. The August 25 print is therefore less about whether Workday can beat the quarterly number and more about whether guidance language on AI monetisation and subscription growth can justify any multiple above the Morgan Stanley target — and how the Street reconciles an 18-analyst buy consensus with two freshly minted Underperform calls sitting well below market.
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