Paycor stock rating cut to Hold by Stifel, target to $22.50

On Tuesday, Stifel analysts adjusted their stance on Paycor HCM Inc (NASDAQ: NASDAQ:PYCR), downgrading the stock from Buy to Hold and lowering the price target to $22.50 from the previous $25.00. The revision comes in the wake of Paychex's (NASDAQ: NASDAQ:PAYX) announcement before the market opened on Tuesday of its definitive agreement to acquire Paycor in an all-cash transaction. According to InvestingPro data, Paycor's stock has surged 23.1% in the past week, with the RSI indicating overbought conditions.

The deal, valued at approximately $4.1 billion, translates to a 4.6x enterprise value/revenue multiple based on Stifel's calendar year 2026 revenue estimate of around $896 million for Paycor. This acquisition by Paychex, a player in the integrated human capital management solutions sector, is a significant move within the industry. The company has demonstrated strong fundamentals with a 66% gross profit margin and 17.45% revenue growth in the last twelve months.

Stifel's downgrade reflects the anticipated changes in Paycor's operational and financial outlook following the acquisition. Paycor, known for providing comprehensive HCM solutions to small and medium-sized businesses, is now set to join forces with Paychex, which is expected to enhance the combined entity's capabilities and market reach.

The acquisition is subject to customary closing conditions and regulatory approvals. Until the transaction is finalized, Paycor will continue to operate independently. The financial details of the deal have been made public, offering a clear view of the valuation metrics considered by Paychex in this strategic acquisition.

In other recent news, Paychex, a leading human capital management company, has announced its definitive agreement to acquire Paycor HCM, in a transaction valued at approximately $4.1 billion. The merger aims to enhance Paychex's capabilities in the upmarket segment and broaden its AI-driven HR technology capabilities. Analyst firm Needham maintained its Buy rating for Paycor amidst the acquisition news, reflecting confidence in the company's standalone value.

Paycor has also experienced a series of significant developments recently. BMO Capital Markets upgraded Paycor stock to "Outperform" and increased the price target from $19.00 to $24.00, citing a more attractive risk/reward balance. Similarly, TD Cowen upgraded Paycor from Hold to Buy, showing confidence in the company's growth prospects.

The company reported a 17% increase in total revenue, reaching $167 million, at the start of fiscal year 2025. Recurring revenue also saw a 16% increase, and Paycor ended the first quarter with a strong cash position of $98 million, free of debt. Paycor's focus on AI and market expansion initiatives, including the launch of Paycor Assistant and the Paycor Integration Platform, continues to drive growth.

Looking ahead, Paycor has raised its revenue guidance for fiscal year 2025 to between $726 million and $733 million, anticipating a 12% revenue growth for the year.

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