James Faucette, an analyst from Morgan Stanley, maintained the Hold rating on Paychex (PAYX – Research Report). The associated price target was raised to $142.00.
James Faucette has given his Hold rating due to a combination of factors influencing Paychex’s current market position. The company has demonstrated stability in the small and medium-sized business (SMB) sector, with checks per client remaining consistent, indicating a stable labor market. However, there were slight softness in customer employment levels due to temporary weather-related challenges and events like the California wildfires, which have slightly impacted the company’s performance.
Despite these challenges, Paychex’s profitability has remained strong, even as the Professional Employer Organization (PEO) segment, particularly in Florida, faced concerns due to the upcoming hurricane season. The company adjusted its revenue growth targets for PEO and Insurance Solutions, which led to some investor concerns. Nonetheless, the anticipated Paycor acquisition, expected to close in April 2025, is projected to bring about cost synergies and earlier-than-expected earnings per share (EPS) accretion. These factors collectively contribute to the Hold rating, as they reflect a balance between stable performance and potential risks.
In another report released today, Citi also maintained a Hold rating on the stock with a $158.00 price target.