Bank of America Securities analyst Adam Bergere reiterated a Hold rating on Paylocity (PCTY – Research Report) today and set a price target of $175.00.
Geoff Meacham has given his Hold rating due to a combination of factors that indicate a deceleration in Paylocity’s growth trajectory and increasing macroeconomic challenges. Although the company’s total revenue surpassed forecasts, it was largely due to an unexpected rise in interest income, not core business performance. The slower than anticipated growth in client employee numbers and subdued sales productivity have also contributed to a reduced revenue outlook for the fiscal year. Additionally, the report points to the payroll software industry facing a reset, with challenges such as the end of post-COVID stimulus funds, tighter monetary policy, a competitive labor market, and increased competition putting pressure on the company’s growth prospects.
Meacham further justifies the Hold recommendation by noting that the revised guidance suggests a significant slowdown from the previous year’s growth rate, which could lead to a temporary exodus of growth investors or deter new investors in the short term. Despite these concerns, Paylocity’s ability to maintain its adjusted EBITDA margin forecast provides some valuation support. The price objective has been adjusted to $175, reflecting this slower growth and aligning with industry peers’ cash flow multiples. This more cautious valuation approach reflects both the near-term headwinds Paylocity faces and the company’s ongoing efforts to sell back into its existing customer base to mitigate some of these challenges.
In another report released yesterday, Jefferies also maintained a Hold rating on the stock with a $180.00 price target.
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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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