On Wednesday, Citi maintained its Buy rating on Dayforce, a company traded on the New York Stock Exchange under the ticker NYSE:DAY, and raised its price target to $74 from the previous $66. The adjustment follows Dayforce's recent performance, which surpassed expectations with a slight revenue beat and consistent results excluding float. The company's guidance was also modestly increased, with a more significant adjustment on a constant currency (cc) basis.
Dayforce's recent financial results showed a 1.4% revenue beat, in line with their last quarter's performance and their four-quarter average. The guidance for future revenues saw an uplift of $6 million, aligning with expectations for the company's performance excluding float. On a constant currency basis, the revenue guidance increased by $11 million, with a $2-3 million enhancement expected for Dayforce excluding float.
The company's bookings demonstrated robust growth, reporting a 51% year-over-year increase, excluding float. This growth was partly attributed to an expanded deal with the California government worth $62 million and successful initiatives aimed at existing customer engagement. These factors have contributed to a solid free cash flow (FCF) for the company.
Citi's commentary highlighted the company's strong execution and improved win rates, which are expected to continue driving free cash flow upwards. With these positive indicators, Citi has reaffirmed its confidence in Dayforce, considering it well-positioned within the Human Capital Management (HCM) sector, warranting the elevated price target of $74.
InvestingPro Insights
Following Citi's optimistic outlook on Dayforce, InvestingPro provides additional insights that may interest investors. With a market capitalization of $9.56 billion, Dayforce is recognized for its impressive gross profit margins, which stood at 48.37% over the last twelve months as of Q1 2024. The company's revenue growth remains strong, with an 18.97% increase year-over-year, reflecting its consistent performance and potential for further expansion.
InvestingPro Tips indicate that Dayforce is expected to see net income growth this year, which aligns with the positive revenue guidance updates mentioned by Citi. Additionally, Dayforce operates with a moderate level of debt, which could be a sign of a balanced approach to leveraging and financial stability. For investors seeking deeper analysis, there are over 10 additional InvestingPro Tips available, offering a comprehensive outlook on Dayforce's financial health and market potential.
While the P/E ratio may appear elevated at 180.63, the PEG ratio of 0.68 suggests that the company's earnings growth could justify this valuation to some investors. As the market continues to assess Dayforce's value, the InvestingPro Fair Value estimate stands at $57.04, offering a data-driven perspective on the stock's intrinsic worth.
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