Paycom Software Sinks 37% as Analysts Downgrade the Stock After Revenue Cut

On Tuesday, Paycom reported third-quarter adjusted earnings that beat expectations but revenue that missed, while fourth-quarter guidance was below consensus. For the full year, Paycom said it expects revenue in the range of $1.68 billion to $1.684 billion, below analysts’ estimates of $1.714 billion, and down from a prior call for $1.715 billion to $1.717 billion.

Adjusted earnings before interest, tax, depreciation, and amortization was forecast at between $712 million to $717 million, lower than an earlier range of $722 million to $724 million. Analysts were expecting $723.3 million.

“The main culprit of the lowered guidance is Beti,” wrote William Blair analysts led by Matthew Pfau, who lowered their rating on the stock to Market Perform from Outperform. On the earnings call, management defined Beti as a “do-it-yourself payroll for employees,” that has prevented errors “which would otherwise be billable items.”

This might mean lower revenue growth for now, but “longer-term, management believes the value Beti provides to clients will help it win additional market share and be worth the short-term trade-off,” William Blair analysts wrote.

Oppenheimer analysts led by Brian Schwartz cut their rating on the stock to Perform from Outperform and removed their $400 price target, citing growth concerns, while Mizuho analysts led by Siti Panigrahi maintained a Neutral rating but lowered their price target to $185 from $325.

Write to Emily Dattilo at [email protected]