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Paylocity Rises 28% YTD: How Should Investors Play the Stock?
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Paylocity Holding (PCTY - Free Report) shares have risen 27.5% on a year-to-date (YTD) basis compared with the Zacks Internet - Software industry and the Zacks Computer & Technology sector’s return of 32.6% and 27.6%, respectively.
Over the same time frame, Paylocity Holding had outperformed shares of its competitors, including Paycom Software (PAYC - Free Report) , Paychex (PAYX - Free Report) and Workday (WDAY - Free Report) . On a YTD basis, PAYC and PAYX returned 13.5% and 22%, respectively, while WDAY lost 3%.
This outperformance stems from its enhanced sales execution and ongoing investments in technological upgrades and product innovation.
The company's initiative to utilize generative artificial intelligence (AI), along with a strong commitment to fostering innovation and delivering the most advanced software platform in the industry, continues to support its top-line growth.
The company’s sustained efforts in recent acquisitions reinforce its status as the leading cloud-based human capital management (HCM) and payroll software solution provider, effectively serving a vast and diverse client base.
Paylocity’s latest acquisition of Airbase Inc., a modern finance and spend management software solution that combines bill pay/accounts payable automation, expense management, corporate cards and procurement capabilities is a significant move.
The acquisition of Airbase significantly strengthens PCTY’s portfolio, delivering essential integrated value to HR and finance leaders by empowering them to manage all their spending on a single platform. This strategic move decisively expands PCTY’s total addressable market beyond HCM and boldly positions the company within the office of the CFO.
The integration of Airbase’s financial solutions with Paylocity’s HCM platform will enable companies to manage all payroll and non-payroll expenditures through a single interface, providing real-time visibility, a quicker financial close, enhanced planning and stronger financial controls.
Paylocity’s other notable acquisitions over the past few years include Trace, Cloudsnap and Blue Marble Payroll. These acquisitions have strengthened the company’s portfolio and opened new avenues of growth.
PCTY Rides on a Strong Portfolio
Paylocity has been the frontrunner of the first HCM solution provider to incorporate generative AI into its platform. The company recently unveiled its AI Assistant, a sophisticated chatbot powered by conversational AI, aimed at enhancing HR processes and improving the employee experience.
The Paylocity AI Assistant streamlines HR-related tasks by offering real-time contextual support throughout the platform. This functionality enables clients to efficiently complete administrative tasks and promptly answer employee inquiries, ultimately enhancing the Paylocity platform's efficiency and improving the overall employee experience.
PCTY recently introduced Headcount Planning, a new solution that unites Finance, HR, Talent Acquisition and hiring managers to foster a more integrated, data-driven approach to workforce planning.
It allows businesses to proactively assess their headcount requirements across the organization. It helps manage workflows and approvals from the initial forecasting stage through opening new roles. Additionally, it provides comprehensive reporting to stay ahead of the constantly changing talent needs as employees join, move, or leave the organization.
PCTY Offers Positive Q2 and FY25 Guidance
For the second quarter of fiscal 2025, PCTY expects total revenues to be in the range of $364-$369 million, indicating year-over-year growth of 12.3%. The Zacks Consensus Estimate is pegged at $366.8 million, indicating a year-over-year rise of 12.4%.
The consensus mark for earnings is pegged at $1.38 per share, unchanged over the past 60 days, indicating a fall of 7.4% year over year.
Total revenues for 2025 are expected in the band of $1.535-$1.550 billion, indicating a rise of about 10% year over year. The consensus mark for revenues is pegged at $1.54 billion.
The consensus mark for earnings is pegged at $6.50 per share, up 2.5% over the past 60 days, indicating a year-over-year fall of 1.1%.
Risks Persist for PCTY Stock
The ongoing macroeconomic challenges and geopolitical issues have resulted in significant headcount reductions across Paylocity’s client base. The condition could affect the company’s business in the form of lower transaction volumes or loss of clients. Potential clients tend to lower their overall spending on payroll and other HCM services. We believe this could cause Paylocity to come under pressure, thereby reducing revenue growth potential in the future.
Furthermore, Paylocity’s lofty valuation multiple limits the stock’s potential for upward momentum. PCTY currently trades at a forward 12-month price-to-earnings (P/E) multiple of 31.2, significantly higher than the industry average of 26.47.
What Investors Should Do With PCTY Stock
Paylocity’s 28% YTD rally highlights its strength as a leading player in the HCM space. The company’s long-term prospects seem promising, considering its sustained focus on expanding its portfolio, strategic acquisitions and AI integration. However, ongoing macroeconomic uncertainties and the stock’s lofty valuation multiple warrant caution.
Image: Bigstock
Paylocity Rises 28% YTD: How Should Investors Play the Stock?
Paylocity Holding (PCTY - Free Report) shares have risen 27.5% on a year-to-date (YTD) basis compared with the Zacks Internet - Software industry and the Zacks Computer & Technology sector’s return of 32.6% and 27.6%, respectively.
Over the same time frame, Paylocity Holding had outperformed shares of its competitors, including Paycom Software (PAYC - Free Report) , Paychex (PAYX - Free Report) and Workday (WDAY - Free Report) . On a YTD basis, PAYC and PAYX returned 13.5% and 22%, respectively, while WDAY lost 3%.
This outperformance stems from its enhanced sales execution and ongoing investments in technological upgrades and product innovation.
The company's initiative to utilize generative artificial intelligence (AI), along with a strong commitment to fostering innovation and delivering the most advanced software platform in the industry, continues to support its top-line growth.
The company’s sustained efforts in recent acquisitions reinforce its status as the leading cloud-based human capital management (HCM) and payroll software solution provider, effectively serving a vast and diverse client base.
Paylocity Holding Corporation Price and Consensus
Paylocity Holding Corporation price-consensus-chart | Paylocity Holding Corporation Quote
Strategic Acquisitions Aid PCTY’s Prospects
Paylocity’s latest acquisition of Airbase Inc., a modern finance and spend management software solution that combines bill pay/accounts payable automation, expense management, corporate cards and procurement capabilities is a significant move.
The acquisition of Airbase significantly strengthens PCTY’s portfolio, delivering essential integrated value to HR and finance leaders by empowering them to manage all their spending on a single platform. This strategic move decisively expands PCTY’s total addressable market beyond HCM and boldly positions the company within the office of the CFO.
The integration of Airbase’s financial solutions with Paylocity’s HCM platform will enable companies to manage all payroll and non-payroll expenditures through a single interface, providing real-time visibility, a quicker financial close, enhanced planning and stronger financial controls.
Paylocity’s other notable acquisitions over the past few years include Trace, Cloudsnap and Blue Marble Payroll. These acquisitions have strengthened the company’s portfolio and opened new avenues of growth.
PCTY Rides on a Strong Portfolio
Paylocity has been the frontrunner of the first HCM solution provider to incorporate generative AI into its platform. The company recently unveiled its AI Assistant, a sophisticated chatbot powered by conversational AI, aimed at enhancing HR processes and improving the employee experience.
The Paylocity AI Assistant streamlines HR-related tasks by offering real-time contextual support throughout the platform. This functionality enables clients to efficiently complete administrative tasks and promptly answer employee inquiries, ultimately enhancing the Paylocity platform's efficiency and improving the overall employee experience.
PCTY recently introduced Headcount Planning, a new solution that unites Finance, HR, Talent Acquisition and hiring managers to foster a more integrated, data-driven approach to workforce planning.
It allows businesses to proactively assess their headcount requirements across the organization. It helps manage workflows and approvals from the initial forecasting stage through opening new roles. Additionally, it provides comprehensive reporting to stay ahead of the constantly changing talent needs as employees join, move, or leave the organization.
PCTY Offers Positive Q2 and FY25 Guidance
For the second quarter of fiscal 2025, PCTY expects total revenues to be in the range of $364-$369 million, indicating year-over-year growth of 12.3%. The Zacks Consensus Estimate is pegged at $366.8 million, indicating a year-over-year rise of 12.4%.
The consensus mark for earnings is pegged at $1.38 per share, unchanged over the past 60 days, indicating a fall of 7.4% year over year.
Total revenues for 2025 are expected in the band of $1.535-$1.550 billion, indicating a rise of about 10% year over year. The consensus mark for revenues is pegged at $1.54 billion.
The consensus mark for earnings is pegged at $6.50 per share, up 2.5% over the past 60 days, indicating a year-over-year fall of 1.1%.
Risks Persist for PCTY Stock
The ongoing macroeconomic challenges and geopolitical issues have resulted in significant headcount reductions across Paylocity’s client base. The condition could affect the company’s business in the form of lower transaction volumes or loss of clients. Potential clients tend to lower their overall spending on payroll and other HCM services. We believe this could cause Paylocity to come under pressure, thereby reducing revenue growth potential in the future.
Furthermore, Paylocity’s lofty valuation multiple limits the stock’s potential for upward momentum. PCTY currently trades at a forward 12-month price-to-earnings (P/E) multiple of 31.2, significantly higher than the industry average of 26.47.
What Investors Should Do With PCTY Stock
Paylocity’s 28% YTD rally highlights its strength as a leading player in the HCM space. The company’s long-term prospects seem promising, considering its sustained focus on expanding its portfolio, strategic acquisitions and AI integration. However, ongoing macroeconomic uncertainties and the stock’s lofty valuation multiple warrant caution.
PCTY currently carries a Zacks Rank #3 (Hold), implying that existing investors should keep holding the stock while new buyers should wait for a better entry point into the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.