Citi lifts Paychex stock price target to $158 on robust results

On Thursday, Citi analysts adjusted their outlook on Paychex (NASDAQ:PAYX) shares, increasing the price target to $158 from the previous $145, while maintaining a Neutral rating on the stock. According to InvestingPro data, the stock is currently trading slightly above its Fair Value, with a P/E ratio of 30x. The revision follows Paychex’s third fiscal quarter 2025 results, which largely met market expectations, except for some minor weaknesses in the Professional Employer Organization (PEO) zero-margin passthrough growth.

Paychex’s performance showcased strong client retention and positive bookings growth, supported by impressive gross profit margins of 71.8% and robust revenue growth of 4.18% over the last twelve months. Additionally, small and medium-sized business (SMB) out-of-business losses were lower than anticipated, which could be seen as surprising given current macroeconomic concerns. The financial services firm also noted improved expectations for the first-year accretion from Paycor (NASDAQ:PYCR), which is now anticipated to be positive. InvestingPro subscribers can access 12+ additional exclusive tips about Paychex’s financial health and growth prospects.

The detailed pro forma model introduced by Citi suggests a 7%-8% accretion, leading to a forecasted earnings per share (EPS) of $5.65 for the fiscal year 2026. This projection underpins the raised price target. The analysts expect revenue synergies to start modestly, with approximately 1% incremental in fiscal year 2026, and to increase to a 6%-7% synergy realization by fiscal year 2030.

The report from Citi reflects confidence in Paychex’s ability to maintain its strong position in the market and capitalize on its recent acquisition of Paycor. The company’s resilient client base and positive growth in bookings contribute to the optimistic revenue synergy forecast in the coming years. The new price target represents Citi’s updated valuation based on these factors.

In other recent news, Paychex Inc . reported its third-quarter earnings for fiscal year 2025, slightly exceeding analysts’ expectations with earnings per share (EPS) of $1.49 against the forecast of $1.48. The company’s revenue aligned with predictions at $1.51 billion, marking a 5% increase from the previous year. Paychex’s operating margin expanded by 180 basis points, reaching 46.9%, and the company anticipates further growth with the upcoming acquisition of Paycor. This acquisition is expected to drive a 10-12% revenue increase in the fourth quarter and to be accretive to adjusted EPS in fiscal 2026.

Additionally, Paychex continues to invest in AI and technology-driven solutions, aiming to enhance productivity and efficiency across the company. The company also reported a healthy performance in its Management Solutions and PEO and insurance solutions segments. Analysts have shown a positive outlook, with firms like William Blair inquiring about the integration plans for the Paycor acquisition and the impact of AI investments during the earnings call. Paychex’s management has expressed confidence in their strategic direction, emphasizing the strength of their PEO business and ongoing efforts to drive efficiency through technology. These developments highlight Paychex’s strategic growth initiatives and its focus on expanding its market position.

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