On Monday, TD Cowen, a financial services firm, updated its outlook on Paylocity Holding (NASDAQ: NASDAQ:PCTY), a leading provider of cloud-based payroll and human capital management software solutions.
The firm's analyst has increased the price target for Paylocity's shares to $235 from the previous target of $208, while maintaining a Buy rating on the stock.
The adjustment in the price target is a reflection of the latest federal funds (FF) rate expectations and considerations for the company's forthcoming second-quarter financial report. The new price target is based on a 34.5 times multiple of the calendar year 2026 estimated enterprise value to free cash flow (EV/FCF).
TD Cowen's revised revenue estimates for Paylocity are primarily due to anticipated changes in float revenue, which is income earned on funds held temporarily during the payroll process, in light of updated FF rate projections. The firm now expects Paylocity to achieve ex float revenue growth of 12.3%, 10.6%, and 11.1% for fiscal years 2025 through 2027, respectively.
Additionally, the analyst has increased adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and free cash flow (FCF) estimates, primarily driven by the higher revenue projections. The updated financial models suggest free cash flow margins of 20.0%, 20.5%, and 21.2% for fiscal years 2025 to 2027.
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