EPS Revisions Lag Despite Low Valuations, Signaling Further Downside for Workday
RBC Capital Markets strategist Lori Calvasina warns that while software valuations have tumbled to near-historic lows, enterprise software EPS revisions remain positive, suggesting further downside risk for stocks like Workday. ServiceNow shares have plunged 44.6% year to date and Salesforce is down over 40%, highlighting sector-wide pressure.
1. Strategist Views on Valuations and EPS Revisions
Lori Calvasina highlights that enterprise software valuations have plunged close to past lows, yet earnings-per-share revisions for the group remain positive around the 50% mark. This divergence indicates that analysts have not yet marked down future profits enough, leaving names like Workday exposed to potential further multiple compression.
2. Sector Performance Illustrates Downside Risk
The software sector has suffered significant valuation resets this year, driven by AI-driven development democratization, license seat compression and growth challenges. ServiceNow shares have fallen 44.6% YTD, Salesforce is off over 40%, and Adobe has dropped nearly 20%, demonstrating broad vulnerability that could extend to Workday.