On Tuesday, BTIG initiated coverage on Paycom Software (NYSE:PAYC), assigning a Neutral rating to the stock. The firm recognized Paycom's proven capability to develop innovative solutions that streamline time-consuming tasks for employees and reduce payroll errors. Despite these strengths and a substantial total addressable market (TAM) valued at $19.8 billion, BTIG remains cautious about Paycom's potential to expand into the market of larger clients with thousands of employees, where competition is notably fierce.
Paycom, known for its human capital management (HCM) solutions, has been successful in attracting over 36,500 employers, contributing to a trailing twelve-month (TTM) revenue of $1.63 billion, marking a growth of over 26%. However, BTIG forecasts a modest 11% growth in the next twelve months (NTM), citing challenges following the introduction of Paycom's self-service platform, Beti. The analyst noted that the Beti rollout could dampen short-term performance.
The firm further explained that while Paycom's solutions resonate with a mobile-centric, modern workforce that values technology for managing payroll and HR functions, the ongoing adoption of Beti and a slower hiring environment in the current economic climate may restrict a swift return to more robust growth trends in the coming quarters.
BTIG's assessment reflects a watchful stance on Paycom's recovery trajectory, emphasizing the current hurdles the company faces with its new platform and the broader market conditions. The firm will continue to monitor Paycom's performance as it navigates these near-term headwinds.
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