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BofA raises Paychex stock target, maintains underperform

EditorAhmed Abdulazez Abdulkadir
Published 04/03/2024, 06:52 AM
PAYX
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On Wednesday, BofA Securities updated its stance on Paychex (NASDAQ:PAYX), increasing the price target to $111 from the previous $108, while keeping an Underperform rating on the company's stock. The adjustment follows Paychex's recent financial performance, where the company experienced a shortfall in its third fiscal quarter revenue, particularly within its Management Solutions segment.

Despite the revenue miss and a lukewarm initial guidance for fiscal year 2025, Paychex's shares have remained nearly unchanged, showing resilience against the broader market trend as represented by the S&P 500. BofA Securities suggests that this unexpected stock stability might be attributed to investor positioning and a notable 50 basis point operating margin outperformance.

The firm notes that Paychex is currently trading at approximately 24 times the calendar year 2024 price-to-earnings (P/E) valuation. Given the economic context of rising unemployment, interest rates reaching a peak, and persistent headwinds from the Employee Retention Tax Credit (ERTC), the securities firm posits that there are more favorable risk/reward opportunities available in the market.

BofA Securities' position reflects caution regarding Paychex's stock, implying that investors may find more promising investment options elsewhere under the current economic conditions. The firm's analysis indicates that despite Paychex's recent operational success, broader market factors could pose challenges to the company's future performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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