Dayforce stock rating downgraded to Hold by TD Cowen after Thoma Bravo offer

Investing.com - TD Cowen downgraded Dayforce (NYSE:DAY) from Buy to Hold while raising its price target to $70.00 from $67.00 following Thoma Bravo’s acquisition offer. The stock has already surged approximately 26% in the past week, currently trading at $68.48.

The downgrade comes after Thoma Bravo’s all-cash offer of $70 per share to acquire Dayforce, representing an enterprise value of $12.3 billion. The company, which maintains impressive gross profit margins of 51% and has delivered revenue growth of ~13.5%, has attracted significant investor attention. InvestingPro analysis indicates the stock is currently trading in overbought territory.

TD Cowen analyst Jared Levine indicated that with "no other apparent logical acquirers," the firm expects the transaction to close at the offered price.

The new price target of $70.00 is based on 5.4x CY26E EV/S (or 32.5x EV/FCF), aligning precisely with Thoma Bravo’s offer price.

The analyst’s decision to downgrade the stock reflects the view that the share price is now constrained by the acquisition offer, limiting further upside potential for investors.

In other recent news, Dayforce has agreed to be acquired by Thoma Bravo in an all-cash transaction valued at $12.3 billion, which will take the company private. Under the agreement, Dayforce stockholders are set to receive $70 per share in cash, marking a 32% premium to the unaffected share price. Prior to this announcement, Dayforce confirmed it was in advanced discussions with Thoma Bravo, following reports that led to a surge in the company’s shares. UBS has reiterated its Buy rating for Dayforce with a price target of $72, as the acquisition talks progress. Meanwhile, BMO Capital has maintained an Outperform rating with a $67 price target, though it noted having no specific insights into the transaction’s potential. KeyBanc Capital Markets also reiterated its Overweight rating, citing strong bookings and a solid second-quarter performance. The firm has set a price target of $65, while Dayforce continues to project recurring revenue growth of 15-17% by 2025. These developments highlight significant investor interest and analyst confidence in Dayforce’s future prospects.

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