Paycom's stock plummets after weak revenue forecast (updated)

Paycom Software

01/11/2023 10:45

(Adds executive comments in paragraphs 4,5; analysts comments
in paragraphs 7-9; updates prices throughout)
       Nov 1 (Reuters) - Shares of Paycom Software  PAYC.N 
lost over a third of their value before the bell on Wednesday,
on track to wipe more than $5 billion off the payroll
processor's market capitalization, after its fourth-quarter
revenue forecast lagged estimates.
    Paycom, one of the top percentage losers among NYSE-listed
stocks in premarket hours, was last down nearly 36% at $155.89.
The stock is set to open at its lowest since early 2019, if
current levels hold.
    At least five brokerages cut their price targets on the
stock after the Oklahoma City-based company said it was
expecting fourth-quarter revenue in the range of $420 million to
$425 million. Analysts on average estimated $452.3 million,
according to LSEG data.
    Company executives said a jump in usage of its flagship
product Beti, which increases efficiency for clients by letting
their employees do their own payroll, was "cannibalizing" some
revenues it would have otherwise earned.
    "Now that more clients are achieving the ROI (return on
investment) that Beti has to offer, it has eliminated certain
billable items," CFO Craig Boelte said on a post-earnings call
after market closed on Tuesday.
    Shares of competitors Ceridian HCM Holding  CDAY.N  and
Automatic Data Processing  ADP.O  also lost over 2% each in
premarket trading.
    "Paycom's laser focus on driving automation and self-service
payroll appears to have become a double-edged sword for the
firm," Morningstar analyst Emma Williams wrote in a note.
    Brokerage TD Cowen cautioned that trading in the stock would
remain range-bound as investors seek more detail on a potential
recovery.
    "With higher uncertainty and lower visibility, we do not
have a basis to recommend shares," TD Cowen said.
    

 (Reporting by Niket Nishant in Bengaluru; Editing by Shilpi
Majumdar)
 ((Niket.Nishant@thomsonreuters.com;))