Guggenheim initiates Paycom Software stock with Buy rating on AI potential

Investing.com - Guggenheim initiated coverage on Paycom Software (NYSE:PAYC) with a Buy rating and a $270 price target, representing a potential 24% upside from current levels. According to InvestingPro data, this aligns with broader analyst sentiment, as 10 analysts have recently revised their earnings estimates upward for the upcoming period.

The firm acknowledges industry-wide concerns about artificial intelligence potentially reducing workforce headcounts—a key metric for human capital management (HCM) pricing models—but believes these fears may be overblown, contributing to the sector’s underperformance compared to the iShares Expanded Tech-Software ETF year-to-date. Despite market concerns, Paycom has maintained solid performance with revenue growth of 10.2% over the last twelve months to $1.96 billion.

Guggenheim cites Paycom’s architectural advantages, particularly its single database foundation, as positioning the company well for the AI era, enabling automation of complex HR processes through products like Beti for payroll self-service and the recently launched IWant AI engine.

The research firm projects that Paycom can maintain double-digit revenue growth within its core small and mid-market business segments, with potential for expansion into larger enterprise clients.

Paycom’s in-house approach to infrastructure, including managing its own data centers, provides a fixed cost structure advantage that enables industry-leading gross and operating margins compared to its HCM peers, according to the analysis. InvestingPro data confirms this advantage with an impressive 86.2% gross profit margin. For deeper insights into Paycom’s financial health and detailed analysis, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, Paycom Software has reported a "strong 2Q beat" on both earnings and revenue, prompting KeyBanc Capital Markets to raise its price target to $290 while maintaining an Overweight rating. The company also increased its full-year guidance, exceeding expectations. Stifel has also adjusted its price target, raising it to $240 due to a significant improvement in Paycom’s EBITDA margins, which grew by 450 basis points to 41%. Meanwhile, TD Cowen has lowered its price target to $246, citing concerns over free cash flow despite acknowledging a "healthy revenue beat and raise."

In leadership updates, Paycom announced changes in its executive team, with Shane Hadlock assuming an expanded role as both chief client officer and chief technology officer. Rachael Gannon has also been promoted within the company. Additionally, Felicia Williams has announced her retirement from the Board of Directors, effective September 30, 2025, leading to a reduction in the board size from eight to seven members. These developments reflect ongoing strategic adjustments within Paycom Software.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.