Stifel maintains Paychex stock rating as Paycore acquisition shows promise

Investing.com - Stifel has reiterated its Hold rating and $156.00 price target on Paychex (NASDAQ:PAYX), currently trading at $150.32, following the company’s mid-April acquisition of Paycore. According to InvestingPro data, the company boasts impressive gross profit margins of 72% and has maintained dividend payments for 38 consecutive years.

The financial services firm views the acquisition as "a meaningful positive" strategically, noting it provides Paychex with a robust SaaS solution for the mid-market segment, estimated at $10 billion, which was previously largely inaccessible to the company.

Stifel highlights that the acquisition creates an opportunity for small and medium-sized business clients to remain on the Paychex platform as they outgrow the company’s legacy offerings, strengthening customer retention potential.

Despite an initial debt burden of approximately $225 million pre-tax, Stifel projects the acquisition will be "modestly accretive" to fiscal year 2026 earnings per share by about 1.5%, with accretion increasing to over 3% in fiscal year 2027.

The firm notes that Paychex is currently trading at a 70% premium to the equal-weight S&P 500, in line with ADP and above its mid-60’s five-year average, which Stifel considers "fully-valued and likely reflecting its defensive characteristics."

In other recent news, Paychex is gearing up for its fourth-quarter earnings report, with TD Cowen expecting results slightly above Wall Street estimates. The firm raised its price target for Paychex to $153, citing stable demand and employment conditions. Morgan Stanley (NYSE:MS) maintained its Equalweight rating with a $150 target, highlighting the positive impact of acquiring Paycor (NASDAQ:PYCR), which could expand Paychex’s market reach. RBC Capital also reaffirmed its price target at $165, noting the company’s alignment with fiscal year 2026 growth expectations and potential cost synergies from the Paycor acquisition.

In corporate developments, Paychex founder B. Thomas Golisano announced his retirement from the board of directors, effective after the July 2025 meeting. Golisano’s departure marks the end of an era for the company he founded in 1971. Additionally, Paychex has increased its quarterly cash dividend by 10% to $1.08 per share, reflecting its ongoing commitment to returning value to shareholders. These recent developments underscore Paychex’s strategic focus on growth and shareholder value.

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