On Friday, TD Cowen analysts downgraded Paycor HCM Inc (NASDAQ:PYCR) stock from Buy to Hold while adjusting the price target slightly higher to $22.50, up from the previous $22.00. The change in rating follows Paychex Inc .'s (NASDAQ:PAYX) proposal to acquire Paycor in an all-cash transaction valued at $22.50 per share.
According to InvestingPro data, Paycor has demonstrated strong financial health with robust revenue growth of 17.45% over the last twelve months.
The analysts at TD Cowen cited the acquisition offer as the primary reason for the downgrade, noting that with Paycor's top shareholder, Apax (HN:IBC) Partners—which holds a 53% ownership stake—supporting the deal, the likelihood of the transaction's completion is high. They do not foresee any other potential buyers that would present a logical fit for Paycor.
The company's impressive gross profit margins of 66% and strong operational metrics are available on InvestingPro, which offers comprehensive analysis of 1,400+ stocks through its Pro Research Reports.
The revised price target of $22.50 is based on approximately 4.5 times the calendar year 2026 estimated enterprise value to sales (EV/S) ratio. This adjustment aligns the target with the acquisition price offered by Paychex. The stock has already seen a significant 68% price return over the past six months, reflecting market optimism about the deal.
The acquisition offer by Paychex represents a strategic move to expand its portfolio in the human capital management space. Paycor specializes in providing software solutions that help businesses manage their workforce, including payroll, timekeeping, and human resources services.
The transaction, pending regulatory and shareholder approval, is expected to proceed without significant hurdles, given the support from Paycor's principal shareholder and the absence of competing bids. Shareholders of Paycor will receive $22.50 in cash for each share they own once the deal is finalized.
In other recent news, Paycor HCM Inc. is set to be acquired by Paychex Inc. in an all-cash transaction valued at approximately $4.1 billion, a development that has prompted various responses from analyst firms. Truist Securities downgraded Paycor's stock from Buy to Hold, while raising the price target to $22.50.
Similarly, Raymond (NS:RYMD) James and JMP Securities downgraded Paycor's stock from Outperform to Market Perform. In contrast, Needham maintained its Buy rating for Paycor, while Mizuho (NYSE:MFG) Securities adjusted its price target for Paycor shares to $22.50 from the previous $20.00.
The acquisition offer represents a 19% premium over Paycor's 30-day volume-weighted average trading price. Paycor has demonstrated solid revenue growth of 17.5% over the past year, and ended the first quarter of fiscal year 2025 with a robust cash position of $98 million, free of debt. These recent developments underscore the importance of monitoring Paycor's progress in the coming quarters.
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