BMO Capital analyst Daniel Jester maintained a Buy rating on Paylocity (PCTY – Research Report) today and set a price target of $200.00.
Daniel Jester’s Buy rating for Paylocity stock is based upon a comprehensive analysis of the company’s potential for growth, margin sustainability, and current valuation. Jester acknowledges the recent concerns surrounding the slowing growth of the number of employees on the platform and the general moderation of growth expectations as we moved through 2023. However, he believes that Paylocity’s strategy of client acquisition and introduction of new products is likely to provide adequate support to counterbalance these trends, especially given the historically consistent underlying sales efficiency that could help the company meet consensus recurring growth estimates into FY24/25.
In terms of margins, while there is a level of uncertainty due to the possibility of lower interest rates affecting income in FY25 and consequently total growth, Jester notes that the company has been reinvesting some of its benefits, which could lead to tighter budgets but also emphasizes the importance of considering the margin excluding float as a significant profitability metric. Concerning valuation, Jester highlights that despite a growth deceleration in a challenging macro environment, Paylocity’s shares are trading at a discount compared to the competition, indicating an undemanding valuation. He suggests that even in conservative scenarios, the stock holds up well in terms of value, further justifying the Buy rating.
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Paylocity (PCTY) Company Description:
Paylocity Holding Corp. engages in the development and provision of cloud-based software solution. It offers cloud-based payroll, human capital management applications, time labor tracking, benefits administration, and talent management. The company was founded on November 6, 2013 and is headquartered in Arlington Heights, IL.
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