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On Monday, TD Cowen maintained its Hold rating on Dayforce (NYSE: DAY) shares, while increasing the price target to $62.00 from the previous $58.00. The adjustment comes as the firm updates its estimates to reflect the latest federal funds rate expectations, foreign exchange considerations, and in anticipation of the company's third-quarter earnings report.
The new price target is based on 4.8 times the estimated calendar year 2026 enterprise value to sales (EV/S) ratio, or 39 times the enterprise value to free cash flow (EV/FCF). This valuation update signifies an expectation of growth and performance metrics that align with these multiples.
Dayforce, which is listed on the New York Stock Exchange, has had its future revenue and cash flow projections analyzed to arrive at the new price target. The firm's methodology incorporates a view on the broader economic factors such as interest rates and currency fluctuations, which can significantly impact multinational companies.
The analyst's comments indicate a forward-looking approach, taking into account the company's potential in the coming years. The reference to the federal funds rate suggests that macroeconomic factors are being closely watched by analysts in their valuation models for companies like Dayforce.
Investors and market watchers will be looking forward to Dayforce's upcoming third-quarter earnings report to gauge the company's performance against these updated expectations. The hold rating suggests that the analyst sees the company as fairly valued at the current levels with the new price target providing a modest upside potential.
In other recent news, Dayforce Inc. has experienced notable developments in its financial strategy, leadership, and market assessments. The company's robust second quarter results were followed by a plan to repurchase up to $500 million of its common stock, highlighting its strong financial performance. KeyBanc initiated coverage on Dayforce, setting an Overweight rating and a price target of $70.00, based on the company's potential to gain market share in the human capital management solutions sector.
In leadership changes, Stephen H. Holdridge was appointed as President and Chief Operating Officer, while Christopher R. Armstrong transitioned to the role of Executive Vice President, Chief Customer Officer.
These developments come as various financial firms have reassessed Dayforce following its strong second quarter performance. BMO Capital Markets and Citi raised their price targets to $70.00 and $74.00 respectively, while Mizuho Securities maintained an Outperform rating with a price target of $70.00.
However, amidst these positive assessments, Piper Sandler maintained a Neutral rating on Dayforce stock, with a price target of $68.00. These recent developments offer investors a variety of perspectives on Dayforce's future performance.
InvestingPro Insights
To complement TD Cowen's analysis, InvestingPro data offers additional insights into Dayforce's financial position. The company's market capitalization stands at $9.78 billion, with a P/E ratio of 204.62, indicating a high valuation relative to current earnings. This aligns with the InvestingPro Tip that Dayforce is "Trading at a high earnings multiple."
Despite the high valuation, Dayforce shows promise in several areas. The company boasts impressive gross profit margins, with the latest data showing a 48.82% gross profit margin for the last twelve months as of Q2 2024. This strength is highlighted by an InvestingPro Tip noting "Impressive gross profit margins."
Moreover, Dayforce has demonstrated strong recent performance, with a 21.68% price total return over the past three months. This is reflected in the InvestingPro Tip indicating a "Strong return over the last three months." The company's revenue growth of 17.56% over the last twelve months also suggests ongoing expansion.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips on Dayforce, providing a deeper understanding of the company's financial health and market position.
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