Truist Securities has adjusted its outlook on Paycor HCM Inc (NASDAQ: NASDAQ:PYCR), lowering the price target to $20.00 from the previous $33.00, yet reaffirming a Buy rating on the stock.
The revision follows a detailed evaluation of the company's future year estimates, with a focus on mitigating potential risks.
The firm's analysis indicates a need for caution due to several non-structural recurring revenue headwinds that are anticipated to affect the company's performance through the first half of fiscal year 2025.
These headwinds include an expected decrease in revenue from form filing and Employee Retention Tax Credit (ERTC) services, which Paycor HCM has highlighted on multiple occasions. Additionally, there has been a higher-than-expected turnover among sales personnel and a projection of lower near-term expansion.
Paycor reported a significant 16% year-over-year revenue growth in the third quarter of fiscal year 2024, driven by a 20% increase in recurring revenue. Despite economic challenges, Paycor projects revenues between $160 million and $162 million for the fourth quarter, with full-year revenue anticipated to be between $650 million and $652 million.
Analysts from Mizuho Securities and TD Cowen have adjusted their outlook on Paycor, citing concerns over growth and sales efficiency. Mizuho lowered the shares target from $19.00 to $15.00 while maintaining a neutral rating, while TD Cowen decreased the price target from $19.00 to $13.00, maintaining a hold rating.
BMO Capital, on the other hand, maintained its Market Perform rating on Paycor with a steady stock price target of $20.00. Despite facing challenges, Paycor remains optimistic about its market position and potential for growth, particularly in the embedded channel.
InvestingPro Insights
As Paycor HCM Inc (NASDAQ:PYCR) navigates through its forecasted headwinds, real-time metrics from InvestingPro provide a broader context for the company's financial health and market performance. With a market capitalization of $2.17 billion, Paycor holds more cash than debt on its balance sheet, which is a solid indicator of financial stability. This aligns with Truist Securities' positive long-term view despite near-term challenges.
InvestingPro data shows a revenue growth of 20.35% over the last twelve months as of Q3 2024, illustrating the company's ability to expand its top-line earnings. Additionally, Paycor's gross profit margin stands at an impressive 66.09%, which is indicative of the company's efficiency in managing its cost of goods sold and maintaining profitability at the gross level.
InvestingPro Tips highlight that while Paycor has not been profitable over the last twelve months, analysts predict the company will become profitable this year. This aligns with the expectation of Truist Securities for improved performance in the second half of the fiscal year. Moreover, Paycor's stock has taken a significant hit over the past six months, with a price total return of -38.29%, potentially presenting a buying opportunity for investors who are confident in the company's ability to recover and grow as projected.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/PYCR, which can provide further insights into Paycor's financial metrics and future outlook.
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