Shares in Paycom Software plunged Wednesday on a September-quarter revenue miss and weak sales guidance for 2024. PAYC stock was down 21% in 2023 heading into the Paycom earnings report, with expectations low for the third quarter.
"While investors were braced for soft results and guidance, PAYC shocked everyone by providing an initial 2024 outlook for 10% to 12% rev growth," said Jefferies analyst Samad Samana in a report. "Management largely attributed the second half weakness and 2024 outlook to cannibalization of services revenue."
At BMO Capital Markets, analyst Daniel Jester said in a report: "The challenges facing Paycom are now fully exposed following the Q3 miss and guide down for 2024."
PAYC Stock: Competitive Market
He added: "Optimistically, next year could be a transition period to a new level of durable growth in 2025 as challenges are addressed. Conversely, the pace of deceleration in a competitive mid/large business HCM (human capital management) market could imply acute issues.
The maker of workforce-management software reported earnings after the market close on Tuesday. On the stock market today, Paycom stock plunged 38.5% to close at 150.69.
The Paycom earnings report dragged down shares in Paylocity Holding, Paychex and Workday.
The Oklahoma City-based company said Paycom earnings in the third quarter were $1.77 a share, up 39% from a year earlier. Revenue rose 22% to $406.3 million.
Analysts expected Paycom to report earnings of $1.61 a share on sales of 411 million for the period ended Sept. 30.
Paycom Stock: 2024 Guidance Weak
For the December quarter, Paycom expects revenue in a range of $420 million to $425 million. At the midpoint of its outlook, that's 14% growth versus consensus estimates of 21% growth to $452 million.
For 2024, Paycom said it expects revenue growth in a range of 10% to 12% vs. consensus estimates for 21% sales growth.
In addition, Paycom has focuses on small- and medium-size companies. Also, the provider of human resources and payroll-processing software has expanded its direct-sales strategy by adding regional offices.
According to IBD Stock Checkup, PAYC stock owned a Relative Strength Rating of 21 out of a possible 99 heading into the Paycom earnings report.
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