Paychex stock price target lifted to $147 by TD Cowen

On Thursday, TD Cowen has adjusted its price target on Paychex (NASDAQ:PAYX) shares, raising it slightly to $147 from $146, while maintaining a Hold rating on the stock. According to InvestingPro data, the stock appears to be trading near its Fair Value, with analyst targets ranging from $120 to $155. Analyst Bryan Bergin provided insights ahead of the company’s third-quarter results, predicting that the performance would align with or slightly exceed market expectations. With impressive gross profit margins of 71.8% and a strong financial health score, Bergin also anticipated that Paychex would confirm its fiscal year 2025 guidance, with the exception of float-related figures.

The analyst suggested that the stock’s premium valuation and the current market positioning might limit the potential for significant upside catalysts, potentially leading to a modest increase in downside risk. This assessment aligns with InvestingPro data showing Paychex trading at elevated multiples, with a P/E ratio of 30.25 and high EBITDA valuation metrics. Despite this, an outsized market reaction is not expected, supporting the decision to keep a neutral stance on the stock. InvestingPro subscribers have access to 15+ additional valuation insights and metrics for deeper analysis.

Bergin noted Paychex’s positive outlook regarding its selling season performance, citing the company’s investments in products and sales as well as stable demand. Confidence was also expressed in the timely completion of Paychex’s proposed acquisition of PYCR, with the deal expected to close by the end of June, if not sooner, given the expiration of the Hart-Scott-Rodino (HSR) Antitrust Improvements Act waiting period.

Investors with a bullish perspective on Paychex are likely to continue viewing the stock as a safe haven amidst market volatility, recognizing the company as a solid long-term investment. They may also have a positive outlook on the potential earnings per share (EPS) accretion from the PYCR deal. On the other hand, bearish investors might focus on the potential limitations in the fiscal year 2025 guidance, the stock’s full valuation, and concerns over accounting quality and a trend toward lower free cash flow (FCF) conversion following the acquisition.

In conclusion, while some investors may have differing views on the value and prospects of Paychex shares, the overall expectation from TD Cowen is that the upcoming earnings report will not significantly sway opinions on either side of the debate. The company’s strong fundamentals, including its 38-year dividend maintenance streak and robust cash flows, continue to support its position as a stable investment. For comprehensive analysis of Paychex and 1,400+ other stocks, including detailed valuation metrics and expert insights, consider exploring InvestingPro’s extensive research reports and tools.

In other recent news, Paycor (NASDAQ:PYCR) HCM, Inc. reported second-quarter fiscal 2025 earnings that exceeded analyst expectations, with a 13% year-over-year revenue increase to $180.4 million. The company’s adjusted earnings per share were $0.14, surpassing the analyst estimate of $0.12. Paycor’s recurring revenues rose 14% year-over-year, contributing to an adjusted operating income increase of 36% to $31.8 million. This growth comes amid Paycor’s pending acquisition by Paychex, Inc. in an all-cash transaction valued at approximately $4.1 billion. The merger is anticipated to close in the first half of calendar 2025, pending regulatory approvals.

Meanwhile, RBC Capital Markets maintained its Sector Perform rating on Paychex with a price target of $148. RBC expects Paychex to report earnings aligned with previous expectations, noting robust sales in Professional Employer Organization services and mid-market Human Capital Management. Paychex’s client retention rates and stable pricing strategies are reportedly improving, although challenges remain with underperforming medical plans in Florida. For fiscal year 2026, RBC anticipates Paychex will set a preliminary revenue growth target of 6% and achieve margin expansion.

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