The 27-year-old, who ended last term at Bramall Lane, has joined the Bantams on a one-year deal.
Davies will arrive at Valley Parade with Championship experience and means City’s attempts to land Stead on a permanent deal are over.
Negotiations had been taking place with the former Huddersfield Town striker since the end of last season but with no resolution in sight, Parkinson pulled the plug.
Walsall and Chesterfield are believed to be interested in Stead, who is a free agent after leaving he Terriers at the end of last month.
Meanwhile, Andrew Davies has signed a two-year contract with Scottish club Ross County after talks over extending his stay at Bradford City broke down without agreement having been reached.
The former Middlesbrough defender has been at Bradford for the past four seasons but has instead opted to move north of the border.
It is understood the proposed deal to keep Davies, who has missed large chunks of those past three campaigns through injury, in Yorkshire was heavily incentivised and based on appearances.
City manager Parkinson is now actively searching for a replacement.