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Investing.com - Guggenheim initiated coverage on Paylocity Holding (NASDAQ:PCTY) with a Neutral rating on Thursday, citing concerns about artificial intelligence’s potential impact on the workforce management software provider. The company, currently trading near its 52-week low with a market capitalization of $9.04 billion, has maintained strong financial health according to InvestingPro data.
The research firm noted that Paylocity has underperformed the IGV market this year due to widespread concerns that AI might replace workers, directly affecting software vendors that charge customers based on headcount. Despite these concerns, Guggenheim believes it’s too early to determine AI’s full impact on the industry. The company has demonstrated resilience with impressive revenue growth of 13.74% and maintains robust gross profit margins of nearly 69%.
Guggenheim pointed to some potential challenges in Paylocity’s upcoming fiscal first quarter of 2026, suggesting the company might struggle to exceed expectations by the 2% margin investors have grown accustomed to over the past three quarters. However, the firm acknowledged that if Paylocity achieves such a beat, the outlook for the rest of the year would be attractive.
The research firm highlighted that Paylocity’s core market of companies with 50-249 employees is showing resilience in ADP data, which could help offset potential weakness in smaller market segments. ADP Net Job Additions are currently trailing behind last year’s figures, with the weakest data coming from the 1-19 employee cohort.
Guggenheim also noted Paylocity’s expansion into financial services with the launch of Paylocity for Finance, which could potentially drive 4%-7% of recurring and other revenue from the existing customer base alone by fiscal year 2028. The stock currently trades at 5.7 times EV/NTM recurring revenue, slightly below industry peers.
In other recent news, Paylocity Holding reported strong fourth-quarter 2025 results, surpassing analyst expectations. The company achieved an earnings per share of $0.86, exceeding the forecasted $0.75, and reported revenue of $400.7 million, above the anticipated $388.53 million. Following these results, BMO Capital raised its price target for Paylocity to $230, maintaining an Outperform rating, citing a better-than-expected recurring revenue beat. Similarly, KeyBanc increased its price target to $225, highlighting the company’s solid performance and a 7% growth in its client base. Cantor Fitzgerald initiated coverage with an Overweight rating and a $215 price target, pointing to a strong quantitative setup and potential for future guidance increases. Citizens JMP reiterated its Market Outperform rating with a $270 price target, following industry developments such as Dayforce’s acquisition by Thoma Bravo. These developments reflect a positive outlook from analysts on Paylocity’s performance and future potential.
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