Analyst Steve Enders of Citi reiterated a Hold rating on Paylocity (PCTY – Research Report), boosting the price target to $176.00.
Steve Enders has given his Hold rating due to a combination of factors surrounding Paylocity’s recent financial performance and market conditions. The company’s third fiscal quarter results surpassed expectations, which were modest to begin with, showing solid revenue and EBITDA figures. Despite these beats, the macroeconomic conditions haven’t shown significant improvement, with employee levels and deal cycles meeting rather than exceeding forecasts. Additionally, while sales productivity has seen an uptick, the raised financial outlook for the company is largely attributed to sustained high interest rates benefiting float revenues, rather than a fundamental increase in subscription growth.
Enders’s cautious stance is further supported by the mix of Paylocity’s revenue beat, which was split between recurring revenue and float, and the observation that much of the raised guidance is due to these float revenues, which may not be a sustainable source of growth. Management’s comments about the next fiscal year suggest conservative expectations for growth, indicating that while there’s potential for margin expansion driven by productivity gains, the overall demand environment remains challenging. The stock’s after-hours positive movement reflects relief from investors but doesn’t alter the underlying concerns about the company’s ability to maintain consistent execution in a competitive market, especially when most of the guidance raise is driven by factors other than core subscription growth.
In another report released today, Barclays also maintained a Hold rating on the stock with a $178.00 price target.
Based on the recent corporate insider activity of 120 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of PCTY in relation to earlier this year.
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Paylocity (PCTY) Company Description:
Paylocity Holding Corp. engages in the development and provision of cloud-based software solution. It offers cloud-based payroll, human capital management applications, time labor tracking, benefits administration, and talent management. The company was founded on November 6, 2013 and is headquartered in Arlington Heights, IL.
