On Tuesday, KeyBanc initiated coverage on Dayforce (NYSE: DAY), a company specializing in human capital management (HCM) solutions. The firm set an Overweight rating on the stock, along with a price target of $70.00.
KeyBanc's analysis suggests that Dayforce is poised to continue capturing market share in its primary mid-market segment, as well as in the enterprise space, due to its growing international capabilities and expanding partner ecosystem.
Dayforce is anticipated to leverage its Wallet product to scale its business significantly, contributing more than 2 percentage points to its annual total revenue growth in the near to mid-term. This expansion is expected to also drive meaningful margin growth, positioning Dayforce for consistent free cash flow (FCF) growth of over 20% in the upcoming years.
"As one of the strongest executors in HCM, we believe continued execution from Dayforce could help drive estimate upside and modest multiple expansion toward other high quality HCM software peers and 20% software growers," the analysts said.
In other recent news, Dayforce Inc. has made significant moves in its leadership, financial strategy, and received diverse assessments from financial firms. The company announced the appointment of Stephen H. Holdridge as President and Chief Operating Officer, while Christopher R. Armstrong transitioned to the role of Executive Vice President, Chief Customer Officer.
Dayforce has initiated a plan to repurchase up to $500 million of its common stock, a move that underscores the company's strong financial performance and scalable business model.
The company has also drawn the attention of various financial firms following its robust second quarter results. BMO Capital Markets raised its price target for Dayforce to $70.00, while Citi increased its price target to $74, both citing the company's successful market penetration and growth in bookings. However, Mizuho Securities adjusted its price target for Dayforce shares to $70, maintaining an Outperform rating, and expecting over 20% year-over-year organic growth in recurring revenue from its product. On the other hand, Piper Sandler maintained its Neutral rating on Dayforce stock, with a price target of $68.00, acknowledging the company's growth prospects amidst macroeconomic uncertainties.
InvestingPro Insights
As KeyBanc positions Dayforce (NYSE: DAY) for a strong future in the HCM sector, InvestingPro data underscores the company's robust financial health and growth prospects. With a market capitalization of $9.36 billion, Dayforce is trading at a high earnings multiple, with a P/E ratio of 198.47. However, this is balanced by a PEG ratio of 0.45 for the last twelve months as of Q2 2024, suggesting that the company's earnings growth may justify the higher P/E ratio. Additionally, Dayforce has demonstrated impressive revenue growth of 17.56% over the last twelve months as of Q2 2024, signaling its successful expansion efforts.
InvestingPro Tips highlight that Dayforce is expected to grow its net income this year and boasts impressive gross profit margins of 48.82% for the last twelve months as of Q2 2024. These metrics are particularly relevant as they reflect the company's ability to maintain profitability and efficiency amidst its growth endeavors. Moreover, with a strong return over the last three months of 17.9%, Dayforce has shown resilience and potential for continued upward momentum. For readers interested in a deeper analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/DAY, which provide further insights into Dayforce's financial and market performance.
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