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On Wednesday, Deutsche Bank (ETR:DBKGn) analysts revised their stance on Dayforce stock, trading on the New York Stock Exchange under the ticker NYSE:DAY. Currently trading at $71.23 with a market capitalization of $11.23 billion, the stock has shown strong momentum with a 47% gain over the past six months.
The firm downgraded the stock from a Buy to a Hold rating and reduced the price target from $85.00 to $80.00. The decision reflects a strategic shift in preference among the Human Capital Management (HCM) sector stocks the bank covers.
The analysts cited several reasons for the downgrade, including limited potential for Dayforce's trading multiple to rise and a challenging investing narrative expected to persist in the Back-Office software sector throughout 2025.
According to InvestingPro data, the stock currently trades at relatively high multiples across various metrics, and 8 analysts have recently revised their earnings expectations downward. They believe stocks with stronger valuation support are more likely to outperform in the current year.
Despite the downgrade, Deutsche Bank acknowledges Dayforce's capability to maintain high-level execution, supported by impressive gross profit margins of nearly 50% as reported by InvestingPro. However, the analysts project only limited upside to the company's current estimates, with the next earnings report due on February 5, 2025. They also note potential modest downside risks associated with movements in foreign exchange rates.
In their commentary, the analysts stated, "We downgrade Dayforce to Hold-rated to reflect a change in relative preference amongst the HCM names in our coverage, and what we see as limited upside to its current trading multiple. We expect the investing narrative in Back-Office software will remain difficult in 2025 and therefore anticipate names with more valuation support to perform better this year."
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