Paycom Software (PAYC) PT Raised to $250 at Stifel Due to Results, Issued Guidance, and Derivative Impact

Stifel analyst Brad Reback raised the price target on Paycom Software (NYSE: PAYC) to $250.00 (from $175.00) while maintaining a Hold rating citing F2Q20 results, the issued 3Q20E show improved visibility and stability, converted S&M spending recorded high bookings and strong demand leads, and derivative impact.

The analyst stated "Paycom delivered a solid 2Q print that was in-line with expectations as customer headcount attrition stabilized during the quarter and now represents a ~$2M/week revenue headwind. That said, management indicated 2Q marketing spend generated better than expected lead activity and its sales force is seeing strong customer engagement and healthy close rates. As a result, management is accelerating 2H20 marketing spending and guided 3Q EBITDA below expectations. With domestic employment activity stabilizing, overall results for the HCM group should be better than our expectations a few months ago, but we believe demand for Payroll/HCM upgrades may lag as the economic situation normalizes as SMB customers focus on revenue generating projects. That said, Paycom is an extremely well-run organization that should be a share gainer in coming years given its ever-expanding product suite and strong go-to-market efforts. We raise our TP to $250, representing 31X our CY22 EBITDA estimate of $454M"

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