Stifel Raises Price Target on Paycom Software (PAYC) Following Strong 1Q Beat
Stifel reiterated a Buy rating on Paycom Software (NYSE: PAYC), and raised the price target to $47.00 (from $44.00), following the company's 1Q earnings report. Paycom delivered EPS/revenue of $0.33/$90.1M, well ahead of the street's $0.20/$83.5M estimate. The top-line upside was driven by better-than-expected recurring revenue of $88.9M.
Analyst Brad Reback commented, "Paycom extended its streak of solid quarterly prints on Tuesday, posting F1Q16 total revenue, recurring revenue, Adjusted EBITDA, operating margin, and EPS ahead of guidance and/or our estimates. The healthy results were punctuated by strong subscription revenue growth (up 64% Y/Y), a $7M top-line beat, and a $11M/250bps increase to FY16 total revenue/Adjusted EBITDA guidance. Paycom continues to be firing on all cylinders but management's decision to abruptly stop providing its quarterly ANRR metric may cause some short-term confusion. As we discuss in more detail below, we understand the company's decision and while investors will have to do without this key metric (which as an aside none of Paycom's peers provide), we believe underlying business fundamentals remain strong. Further, we believe Paycom continues to have limited penetration of a large market opportunity that coupled with a number of drivers (further penetrating existing territories, opening up new sales offices, up/cross-sell, bolt-on complementary solutions, etc.) should support healthy top-line growth and improving profitability in coming years. Given this backdrop, we remain buyers and raise our target price to $47."
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Shares of Paycom Software closed at $38.28 yesterday.