Wall Street hit the pause button on Workday stock Monday following last week's report that a private-equity firm was in talks to acquire the enterprise software company.

Workday stock declined 2.9% to $192.95 in premarket trading on Monday after ending Friday down 3.8%. Shares spiked nearly 18% last Thursday after Reuters reported that private-equity firm Silver Lake and Workday have held discussions in recent months about a possible deal in recent months.

Deutsche Bank and BTIG on Monday downgraded Workday stock to Hold and Neutral, respectively, from Buy. The stock has rallied 76% since hitting a recent closing low of $113.04 on June 22, and both firms cited the sharp share price increase as a reason for why the stock is fairly valued.

While the recent rally, accelerated by the takeover chatter, was a reason for the downgrades, there's more to it.

"WDAY remains a logical private-equity target, in our view, supported by a 97% gross retention rate and strong revenue visibility," BTIG analyst Allan Verkhovski noted.

The analyst, however, wrote that a major reason for the downgrade was that while fiscal 2027 subscription revenue appears to be solid the "consensus growth expectations remain too optimistic."

BTIG pulled its price target of $175 from its previous Buy rating.

Verkhovski further explained that when he assumed coverage of Workday with a Buy rating in December, there was the belief the company was poised to accelerate artificial-intelligence adoption, combined with its "minimal AI disruption risk."

"The private markets provide a much better environment for executing the transition to an AI-centric model," he added.

Software stocks have slumped this year on fears of AI disruption to certain offerings. KeyBanc noted last Thursday that software names could receive a boost from the report that private-equity has been interested in making acquisitions.

To this point, Evercore ISI analyst Kirk Materne on Friday wrote that Silver Lake's interest in Workday "suggest the terminal AI risk attached to scaled enterprise software may be overdone."

Materne added that if Workday is acquired by Silver Lake it could support "more bullish" sentiment on ServiceNow and Salesforce.

While private-equity interest could move Workday and other software stocks higher, nothing is guaranteed.

Workday has risen 24% this month as of the closing bell on Friday, but shares remain down 7.5% this year and have declined 14% over the past 12 months.

"There is potential upside if the private-equity firm secures financing for a $50B+ transaction, we now view the risk-reward as balanced even if talks with the private equity firm break down and shares revert to $175, our prior price target," BTIG's Verkhovski wrote.