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Investing.com - Jefferies has reduced its price target on Paycom Software (NYSE:PAYC) to $225.00 from $250.00 while maintaining its Hold rating on the stock. According to InvestingPro data, Paycom currently trades at $199.82, with analysis suggesting the stock may be undervalued relative to its Fair Value.
The firm believes Paycom can achieve the consensus expectation of 10.5% growth in recurring revenue for the third quarter, citing record sales performance and positive management commentary. This aligns with the company’s impressive 86.17% gross profit margins and current EBITDA of $627.5M, as reported by InvestingPro. Jefferies also expects the company to exceed consensus estimates for EBITDA.
Regarding 2025 guidance, Jefferies anticipates Paycom will raise its outlook by at least the amount of any current beat, as strong first-half bookings flow into the second half of the year.
The firm notes that Paycom shares currently trade at 5.1 times next-twelve-months enterprise value to sales, which sits at the lower end of the recent 5-6x merger and acquisition valuation range.
While Jefferies expects healthy results will benefit the stock in the short term, it remains cautious about medium-term macroeconomic and artificial intelligence overhangs on the business.
In other recent news, Paycom Software has been the focus of several analyst evaluations and company announcements. Guggenheim initiated coverage on Paycom Software with a Buy rating, setting a price target of $270, citing the company’s potential in artificial intelligence. In contrast, TD Cowen adjusted its price target to $246, maintaining a Hold rating due to concerns over free cash flow, despite acknowledging a "healthy revenue beat and raise." Meanwhile, Stifel raised its price target to $240, also maintaining a Hold rating, following a significant year-over-year growth in EBITDA margins to 41%, surpassing expectations.
In company leadership news, Paycom announced executive changes with Shane Hadlock now serving as both chief client officer and chief technology officer. Additionally, the company reported that Felicia Williams will retire from its Board of Directors by September 2025, reducing the board size from eight to seven members. These developments reflect ongoing strategic adjustments within the company.
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