Ceridian HCM is the IBD Stock of the Day as the payroll processor trades near its 50-day moving average. CDAY stock has a better outlook than rivals Automatic Data Processing and Paychex amid worries U.S. unemployment could rise.
On the stock market today, Ceridian stock dipped 1% to 72.51.
From a technical view, CDAY stock trades 9% below a traditional entry point of 79.76. However, shares could be actionable sooner with a decisive move above their 50-day line. Tuesday's intraday high of 73.79 would be the key level to watch for an early entry.
CDAY stock belongs to the Computer Software Specialty Enterprise group. It's ranked No. 20 out of 197 industry groups tracked.
Ceridian Stock: Business Model Shift
Ceridian stock holds a Relative Strength Rating of 90 out of a best-possible 99. ADP's is 31 while Paychex's is 30. Bank of America last week downgraded ADP stock and PAYX to neutral citing a possible U.S. recession, which would lead to higher unemployment.
ADP stock and PAYX stock are members of the IBD Commercial Services — Outsourcing group. The group is ranked much lower than Ceridian's group, and now sits at No. 151. Fiscal third-quarter earnings for ADP stock are due April 26.
Ceridian also competes in the human capital management, or HCM, market vs. Workday, Paycom Software, Paylocity Holding and others.
Ceridian has shifted away from payroll service bureau-type services. Ceridian still gets about 15% of revenue from the payroll service bureau business.
Dayforce Wallet Ramps Up
In a recent note to clients, CDAY stock analyst Daniel Jester of BMO Capital Markets said: "Growth in the core Dayforce business continues with potential upside as Ceridian builds on recent successes in enterprise. Investments today in international expansion and expanding the (Dayforce) Wallet are supportive for long-term growth."
A new product, Ceridian's Dayforce Wallet gives employees early access to earned wages. The Dayforce Wallet lets employees tap wages already earned in the payroll period but are not yet paid out.
The Dayforce Wallet mobile app works with a debit card in most cases for retail transactions. Employees do not directly pay a fee for early access to wages but businesses pay for the service.
At the end of 2022, the Dayforce platform had 5,993 customers, up more than 10% from a year earlier. About 10% of business customers have fewer than 500 employees, about half from 500 to 6,000 employees and 40% with more than 6,000.
CDAY stock analysts estimate that Minneapolis-based Ceridian's 2023 revenue will grow nearly 20% to $1.49 billion. Ceridian aims to generate $2 billion in annual revenue by the end of 2025.
'Float' Revenue Boost
In 2022, Ceridian and other payroll-processing companies got a boost from "float revenue" resulting from higher interest rates. Also, customers transfer money to Ceridian to cover wages usually 24 to 48 hours ahead of payday. For a brief period, Ceridian generates interest income from float revenue funds.
In 2023, CDAY stock has estimated float revenue of about $150 million.
Meanwhile, the payroll processing stock holds an IBD Composite Rating of 99 out of a best possible 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
Further, CDAY stock has an Accumulation/Distribution Rating of A-. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on an A+ to E scale, measures institutional buying and selling in a stock. An A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
CDAY Stock: Making Acquisitions
Originally part of computer maker Control Data, Ceridian became a stand-alone company in 1992 and went private in 2007. Then Ceridian held an initial public offering in 2018 and raised $462 million.
In addition, Ceridian has been making acquisitions — Adam HCM, Excelity, Ascender, and Riteq, to name a few — to expand outside the U.S. Also, it aims to win more multinational companies as customers.
"We believe that the employment environment remains healthy," CDAY stock analyst Siti Panigrahi of Mizuho Securities said in his recent note to clients.
Panigrahi added: "Ceridian is well positioned to deliver 20%-plus sustainable recurring growth as enterprise momentum continues with broadening partnerships, international expansion and cross-sell opportunities to its customer base."
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
