Paycom Software Stock: Shares of Paycom Software tumbled on Wednesday, shedding nearly 40% of their value and erasing approximately $5.5 billion from the company’s market capitalization, all due to a disappointing fourth-quarter revenue forecast.
Paycom, listed on the NYSE, found itself among the day’s top percentage losers, with its stock plummeting to $154.05, a level not witnessed since early 2019. Following the announcement of the revenue forecast, at least nine brokerages slashed their price targets for the company. Paycom’s outlook for fourth-quarter revenue in the range of $420 million to $425 million fell short of analysts’ expectations, which averaged $452.3 million according to LSEG data.
Company executives attributed the revenue decline to the increased usage of their flagship product, Beti. This product enhances efficiency for clients by allowing their employees to manage their own payroll. However, this increased efficiency also “cannibalized” some of the company’s billable items, reducing overall revenue.
Paycom’s laser focus on automation and self-service payroll, while initially beneficial, has had unintended consequences. Morningstar analyst Emma Williams noted that the company’s approach has become a double-edged sword. Brokerage TD Cowen warned that the stock might remain range-bound as investors wait for more clarity on the company’s potential recovery. Given the higher uncertainty and lower visibility, TD Cowen refrained from recommending shares in Paycom Software.
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