The Workday stock price suffered a big reversal in the extended session as the company’s forward guidance came short of expectations. WDAY dropped to a low of $253.62, down by 8% from its highest point this month. This article reviews its business performance and whether it is safe to buy the dip.

Workday forward guidance disappoints

Workday stock price crashed as investors scrutinized whether its investment in artificial intelligence tools is paying off. 

This happened after the company’s results showed that its business did well in the first quarter, but warned that its growth would moderate. 

The results showed that its total revenue rose by 12.6% in Q1 to $2.24 billion, while its subscription figures jumped by 13.4% to $2.058 billion. 

Workday’s subscription revenue backlog jumped by 19% to $24.1 billion. However, the operating margin narrowed by 144 basis points to 1.8% to 30.2%. 

These numbers were slightly better than what Wall Street analysts were expecting. However, the forward guidance showed that the company’s subscription revenue for the second quarter will come in at $2.16 billion. 

These investors were anticipating a better performance because of its recent investments in AI. For example, the company introduced Illuminate Agents that are helping companies simplify their hiring. 

It also integrated with Evisort’s AI contract intelligence and contract lifecycle management solutions. 

Workday and other software companies like Zoom Communication, Salesforce, and ServiceNow have all invested heavily in incorporating AI tools in their businesses. Many of them fear that AI-focused companies could disrupt their businesses. 

Workday’s biggest vulnerability is its human resource business, which this disruption could impact. For example, some companies like Eightfold AI have come up with tools to help in talent acquisition, talent management, and other resource management. Other companies seeking to disrupt the industry are Gloat, Aisera, Legion, and Simpplr.

Is WDAY stock overvalued?

Workday expects that its second-quarter revenue will be $2.34 billion, while its operating margin will be about 28%. 

It expects that its annual revenue will rise by 12% to $9.5 billion and its cash flow will increase by 12% to $2.7 billion.

The company has recently announced layoffs of about 8.5% of its workforce to save on costs. It has also continued to repurchase its stock in a bid to boost its earnings per share (EPS).

A key concern among investors has always been about Wokday’s valuation. It has a GAAP P/E ratio of 91 and a non-GAAP multiple of about 31%.

The rule-of-40 is usually the best approach to value SaaS companies as it measures their growth and profitability. In Workday’s case, it has a revenue growth of about 12% and a net income margin of almost 10%. This gives it a rule-of-40 metric of 22. 

Workday also has a levered free cash flow margin of 25%, meaning that the rule of 40 metric in this case is 37%. This figure also shows that the company is overvalued. However, in many cases, SaaS companies can remain overvalued for a long time. 

Workday stock price technical analysis

The daily chart shows that the WDAY share price has been in a strong bullish trend in the past few months. It moved from a low of $205.50 in April to a high of $275.93 on Monday. 

It then made a big down-gap to $253 after its earnings as concerns about its growth continued. 

The most likely scenario is where the stock consolidates at around $250 and then it bounces back ahead of the next quarterly results. This could push it back to $275 in the next few months.

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Crude oil prices were poised for their first weekly decline in three weeks as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) deliberated another substantial increase in production quotas.

This potential surge in supply comes at a time when the market is already anticipating a surplus, further pressuring prices downward.

International benchmark Brent crude slipped towards $64 a barrel, marking its fourth consecutive session of declines and pushing its weekly loss to approximately 2%.

West Texas Intermediate (WTI), the US benchmark, traded below $61 a barrel.

The downward pressure was intensified by reports that OPEC+ nations were discussing another major output-quota increase, potentially adding 411,000 barrels a day for July.

While delegates indicated that no final agreement has been reached, the mere prospect of additional barrels entering the market weighed heavily on sentiment.

Adding to the bearish narrative, recent data revealed another rise in US commercial oil stockpiles, reinforcing concerns about a growing supply glut.

This has been a persistent theme for crude oil, which has shed about 14% of its value this year, even hitting its lowest point since 2021 last month.

This decline has been largely attributed to OPEC+ loosening its supply curbs at a quicker-than-anticipated pace, a move that coincided with the US-led trade war creating significant headwinds for global energy demand.

OPEC+ at a crossroads: prices vs. market share

Market participants are now keenly focused on the upcoming OPEC+ decision regarding July output levels.

“Focus is increasingly turning to OPEC+ and what the group decides to do with July output levels,” commented Warren Patterson, head of commodities strategy for ING Groep NV, as quoted by Bloomberg.

He suggested that the outcome of this meeting could signal a pivotal shift in the group’s strategy:

Another large increase for July would cement a shift in policy — from defending prices to defending market share.

A group of eight key OPEC+ nations, including the de facto leader Saudi Arabia, is scheduled to hold a virtual meeting on June 1 to finalize July’s production levels.

A recent Bloomberg survey of traders and analysts indicated that a majority expect the group to approve an output quota surge, further underscoring the prevailing market anticipation.

Geopolitical undercurrents: Russian oil cap and US fiscal woes

Beyond the immediate OPEC+ deliberations, other geopolitical and macroeconomic factors are influencing the oil market.

European Commission’s economy chief, Valdis Dombrovskis, stated that it would be “appropriate to lower the price cap on Russian oil to $50 a barrel.”

He argued that the current $60 cap—a measure designed to penalize Moscow for its war against Ukraine while ensuring continued oil flow—is not effectively hurting Russia at current lower price levels.

Meanwhile, broader market sentiment was also affected by concerns surrounding the United States’ fiscal health.

The US dollar was weaker on Friday, on track for its first weekly drop in five weeks against both the euro and the yen, as investors sought safe-haven assets.

Following Moody’s downgrade of US debt ratings last week, investor attention has sharpened on the country’s substantial $36 trillion debt pile.

This concern is further amplified by US President Donald Trump’s proposed tax bill, which could add trillions more to the national debt, creating a cautious atmosphere across financial markets that inevitably spills over into commodities like oil.

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European stock markets commenced Friday’s trading session on a positive note, with major indices broadly higher as investors found solace in retreating bond yields and welcomed a batch of brighter-than-expected economic data from key regional economies.

This upbeat sentiment sets the stage for a potentially strong finish to the week.

Early trading saw the pan-European STOXX 600 index rise by 0.3% by 0721 GMT, putting it on course for an impressive sixth consecutive week of gains.

A significant contributor to this positive mood was encouraging economic news out of the United Kingdom.

The UK’s blue-chip FTSE 100 climbed 0.4% after official data revealed that British retail sales had jumped more than anticipated in April.

Adding to the positive economic picture, data showed that the German economy grew significantly more in the first quarter than previously estimated.

This upward revision was attributed to favorable economic developments in March, providing further evidence of resilience in Europe’s largest economy.

Consequently, the German DAX also advanced by 0.4%, trading just below its all-time highs.

This positive momentum comes after a week where stock markets had faced some selling pressure.

Soaring US Treasury yields, driven by concerns about the ballooning US debt, had previously unsettled investors.

Additionally, May business activity surveys had painted a somewhat gloomy picture of the eurozone economy.

However, a notable easing in benchmark 10-year US and European government bond yields on Friday appeared to alleviate some of these concerns, providing a more supportive backdrop for equities.

Corporate movers: AJ Bell jumps, Michelin upgraded

Among individual stocks making headlines, British investment platform AJ Bell saw its shares surge by an impressive 9.8%.

This significant jump followed the company’s announcement of a 12% year-over-year rise in its half-yearly profit before tax, a result attributed to increased client activity.

French tyre manufacturer Michelin also enjoyed a positive session, with its shares rising 0.9%.

The advance came after Jefferies upgraded the company’s stock to a “buy” rating, citing growth potential in its earnings.

Delving deeper into the UK economic data, retail sales rose by an estimated 1.2% in April on a monthly basis, according to figures released by Britain’s Office for National Statistics on Friday.

This print significantly exceeded the 0.2% month-on-month rise anticipated by analysts polled by Reuters.

The April figures marked a notable recovery from the previous month, when retail sales had risen by a more modest 0.1% month-on-month.

It’s worth noting that the March figure was revised down from an initial preliminary estimate of 0.4% growth in sales volumes.

The ONS attributed the robust April growth partly to strong food store sales, which were up 3.9% on a monthly basis, a performance that retailers linked to favorable weather conditions throughout the month.

Global market context and data watch

The positive sentiment in Europe found some support from overnight developments in Asia, where stock markets were gripped by broadly positive momentum.

This was partly attributed to an agreement between the US and China to keep communication channels open following a call between top officials from both countries.

On Wall Street, stock futures were little changed as investors continued to monitor the elevated levels of US Treasury yields.

Looking ahead, investors will be closely monitoring further economic data releases from the European region.

Figures due out include updates on UK consumer confidence, alongside the already released retail sales.

French consumer confidence data is also on the agenda, as is a final print on Germany’s first-quarter economic growth.

On the earnings front, it’s a relatively quieter day, though British Land and AJ Bell were set to update shareholders on their financial performance.

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Energy bills across the United Kingdom will drop by 7% from July 1, following a decline in wholesale gas prices, according to new figures from the energy regulator Ofgem.

The cut to the price cap, announced on Friday, will lower annual bills for a typical household paying by direct debit to £1,720 — a modest but welcome reduction amid the broader cost-of-living squeeze that continues to grip the country.

The move marks the end of a series of quarterly price increases, but energy bills are still expected to remain elevated by historical standards.

While consultancy Cornwall Insight does not anticipate a dramatic hike in the coming winter, it has forecast only a minimal rise in the next price cap review, suggesting little relief ahead for households already struggling.

Bills remain well above pre-crisis levels

Despite the latest cut, energy bills remain significantly higher than in previous years.

In 2019, the first year Ofgem introduced the price cap, the average annual bill stood at £1,137.

Today’s adjusted figure of £1,720 represents a 51% increase over six years.

Ashton Berkhauer, energy expert at MoneySuperMarket, said the figures highlight how entrenched the rise in energy costs has become.

“Even after this drop, we’re a long way from what was once considered normal,” he noted.

Many households are still grappling with the effects of the energy crisis that began several years ago, compounded by the COVID-19 pandemic and the war in Ukraine, both of which caused steep spikes in gas and electricity prices.

Despite Prime Minister Keir Starmer’s election pledge to tackle soaring energy costs, bills today remain roughly 10% higher than when Labour took office.

Source: The Guardian

Ofgem urges households to shop around

Ofgem acknowledged that while the 7% drop in the cap is a positive step, prices remain high by historical standards.

Tim Jarvis, Director General of Markets at Ofgem, advised consumers to consider alternative tariffs or speak with their current providers to secure better deals.

“You don’t have to pay the price cap,” he said. “There are better deals out there. Changing your payment method to direct debit or smart pay-as-you-go could save up to £136 a year.”

Jarvis added that longer-term reforms are needed to stabilise prices and achieve energy security.

“We’re working closely with the government to get the investment we need to reach our clean power and net zero targets as quickly as possible,” he said.

Pressure builds on government amid volatile energy market

The government has come under renewed pressure to provide more targeted support for low-income and vulnerable households, with experts warning that wholesale prices remain highly sensitive to geopolitical and economic shifts.

Though British gas prices have fallen nearly 30% since the start of the year, they have edged upward again in recent weeks, highlighting the market’s inherent volatility.

Cornwall Insight attributed the most recent drop in prices to several short-term factors, including warmer-than-average temperatures and international developments such as the easing of European gas storage regulations and newly announced US trade tariffs.

Dr Craig Lowrey, principal consultant at Cornwall Insight, cautioned that relief may be fleeting.

“This fall in the price cap is undoubtedly welcome news for households, offering a degree of relief at a time when many are grappling with high living costs,” he said.

But while it’s important to celebrate the small wins, the energy market remains unpredictable. Global events can quickly reverse the current trend.

Energy suppliers, too, have warned against assuming the worst is over.

EDF Energy said that the market remains “incredibly volatile” and that further action is needed to support the most at-risk customers.

The company urged the government and regulator to implement long-term solutions to insulate the UK energy system from international price shocks.

Other utilities add to household cost burden

While energy prices are set to fall in July, water bills have surged sharply.

From April, average water bills in the UK increased by 26% — the steepest annual rise on record.

The rise has been attributed to investment in critical infrastructure and efforts to tackle the growing public backlash over water leaks and sewage pollution.

These parallel increases have left households facing a broader utility squeeze, even as headline inflation begins to stabilise.

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Apple stock price has sold off this year, making it the top laggard in the Magnificent 7 group. It remains in a deep bear market after falling by over 20% from the highest level this year, and has also formed a death cross pattern as the 50-day and 200-day Exponential Moving Averages (EMA) crossed each other.

Will AI glasses save Apple stock?

Apple stock price has crashed in the past few months as concerns about its business continue. The company’s flagship product, the iPhone, has largely peaked, with its annual sales falling. 

Apple has also lost the artificial intelligence (AI) race and has even been sued for false promotion. The lawsuit alleges that the company’s presentation, when showcasing the features, misled consumers.

Apple has responded by replacing its top leaders and committing to more innovation to boost its business. 

One of these innovations is that the company hopes to launch smart glasses at the end of the year, mirroring Google’s strategy in its partnership with Warby Parker. It is also aiming to emulate Meta Platform’s partnership with Ray-Ban. 

Apple also hopes to incorporate AI search on its platform, a move that may see it ditch Google as the main search provider. Such a move would save it over $25 billion that it pays Google annually. 

The fact that Apple has failed to create usable AI products has baffled investors who cite its balance sheet and talent. In contrast, Elon Musk’s xAI built Grok, a platform that has become the biggest threat to ChatGPT. 

Launching AI glasses will likely be a niche product as its Vision Pro did. Launched with pomp and color in 2023, the glasses have not become popular. 

Apple’s slow growth 

The most recent financial results showed that the company is not growing as it did in the past. Its revenue rose to $95.3 billion in the first quarter, up by $5 billion from the same period last year. 

This growth was spread across the product and services segments. Product sales rose to $68 billion, while the services made $26 billion. 

The services segment is made up of top services like Apple Pay, Apple Music, Apple TV+, Apple Arcade, and Apple Fitness. 

Apple has long hoped that the services segment will become a major part of its business. While it has achieved that so far, the segment lacks any clear catalysts to propel its future growth. 

This slow growth has led to concerns about Apple’s valuation since it is now the second-biggest company in the world with a market cap of over $3 trillion. 

Apple trades at a premium, helped by its strong brand, balance sheet, and the ongoing share repurchases program. It has reduced its outstanding shares from 17.13 billion in 2020 to 14.93 billion today, a move that has helped to push its earnings per share from $3.3 to $6.

Apple has a forward P/E multiple of 28, higher than the sector median of 27. Its forward EV to EBITDA is 21, also higher than the technology sector median of 14.

Apple stock price technical analysis

AAPL stock chart by TradingView

The daily chart shows that the AAPL stock price has crashed from the year-to-date high of $260 to $200 today. It formed a death cross pattern on April 8 as the 50-day and 200-day moving averages crossed each other. 

Its attempts to rebound from the April low of $170 have faced substantial resistance at $214, where it formed a double-top pattern.

Therefore, the stock will likely continue falling as sellers target the year-to-date low of $170, which is about 16% below the current level. The bearish outlook will become invalid if the stock rises above $215.

Read more: Cramer is worried about Apple: here’s why

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