Paycom (PAYC) Soars as Q2 Earnings Signal 'Start of Strong Recovery and Move Further Upmarket'

Shares of Paycom Software (NYSE: PAYC) are up 8.5% in today’s trading session after the company delivered stronger-than-expected Q2 results. The company benefited from the new client adds and strong existing-clients performance.

PAYC delivered Q2 profit of $0.97 per share to beat the $0.84 expected from Street. Revenue for the quarter surged 33.3% to $242.15 million from $181.59 million last year.

“The fundamentals of our business continue to strengthen, as demonstrated by our very strong second quarter results. The only way businesses win with Human Capital Management solutions is for the employees to have a direct relationship with their data. With Beti™, employees can now do their own payroll. This is the way it should have always been done and now with Paycom, the technology exists to do it,” said Paycom’s founder and CEO, Chad Richison.

Stifel analyst Brad Reback was impressed by Q2 results that prompted him to raise the price target by $105.00 to $480.00 per share. He rates PAYC as “Buy.”

“Looking towards the back-half of CY21 we believe continued strong new customer acquisition, especially as the company turns its sights further up-market (up to 10K employee organizations), modest acceleration in overall hiring and strong adoption levels of the newly launched BETI solution provide multiple opportunities for further upside to estimates. Net/net, we believe Paycom should remain a net share gainer and has a number of drivers (growth in existing territories, new sales offices/inside sales, moving more up-market, improving sales productivity, up/cross-sell, etc.) that should enable it to sustain 20%+ top-line growth along with strong profitability in coming years,” the analyst said in a note.

For Oppenheimer’s Brian Schwartz, Q2 proved to be the “start of a strong recovery and a move further upmarket.”

“The company reported a robust 2Q which exceeded expectations across key metrics and produced an impressive recurring revenue beat despite a tight labor market. Paycom continues driving strong growth via its leading technology and self-service vision, best-in-class sales engine, and because COVID has accelerated the demand for digital self-service payroll technologies. Last, BETI is poised to enter a broader adoption-phase and looks well-positioned to disrupt the time and attendance market, and further accelerate the industry move to self-service over the FTM. Bottom Line: We think 2Q was not only strong, but indicative of Paycom’s premier ability to capture market share and deliver attractive growth and profit margins, and upside surprises,” Schwartz said in a note sent to clients.

He also hiked the price target on the Outperform-rated PAYC to $500.00 from $475.00 per share.

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