Paychex stock initiated at Market Perform by BMO Capital with $160 target

Investing.com - BMO Capital initiated coverage on Paychex (NASDAQ:PAYX) with a Market Perform rating and a $160.00 price target on Thursday. The company, currently valued at $52.6 billion, has demonstrated strong financial health with impressive gross profit margins of 72.4% and a track record of maintaining dividend payments for 38 consecutive years.

The firm views the recent Paycor (NASDAQ:PYCR) acquisition as a significant strategic move that expands Paychex’s market opportunity across both customers and products.

BMO Capital indicates that investors will need patience to evaluate the execution of Paychex’s up-market growth opportunity and the revenue synergies included in the company’s guidance.

The firm’s assessment considers both company-specific execution challenges and what it perceives as higher near-term risks in the macroeconomic environment.

BMO Capital describes Paychex’s current valuation as "reasonably balanced," with its $160 price target assuming successful execution against fiscal year 2026 guidance and no additional macroeconomic weakness.

In other recent news, Paychex reported its fourth-quarter financial results for fiscal year 2025, showing steady growth despite market challenges. The company achieved an adjusted diluted earnings per share of $1.19 and revenue of $1.43 billion, both aligning with analysts’ expectations. For the full fiscal year, Paychex’s revenue rose by 6%, reaching $5.6 billion. Looking ahead, the company anticipates fiscal 2026 revenue growth of 16.5-18.5%. In terms of analyst actions, RBC Capital maintained its price target for Paychex at $165, while Morgan Stanley (NYSE:MS) lowered its target to $148 due to concerns over higher debt. Stifel also reduced its price target to $152, citing revenue guidance that fell short of expectations. Despite these adjustments, Paychex raised its Paycor cost synergy target to $90 million, supporting its fiscal 2026 operating margin guidance of 43%. Additionally, the company declared a quarterly dividend of $1.08 per share, reinforcing its commitment to returning value to shareholders.

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