Paylocity (NASDAQ: PCTY) is focused on reaching new heights in the human capital management (HCM) domain. Solid demand for its cloud-based payroll and HCM solutions is driving new client additions and client retention rate.
Paylocity’s frequent investments in businesses, software solutions and technologies through collaborations and acquisitions have always been complementary to its businesses and have contributed significantly to its growth over the years.
The PCTY stock has returned a whopping 190.03% on investment in the past 3 years, making it a great stock for long-term investors.
Another Key Acquisition to Boost Prospects
To climb further up the ladder in the HCM industry, the company has acquired a software company, CloudSnap, whose services enable organizations to integrate contrasting business applications to automate their businesses.
Needham analyst Scott Berg was encouraged with the acquisition announcement. “We believe that the acquisition of CloudSnap creates a competitive advantage for Paylocity, as they are able to implement solutions at a faster rate than their competitors,” Berg said.
The company has not disclose the financial terms of the acquisition, however, the analyst estimates the deal to have been worth up to $20 million.
The acquisition is not expected to have any material impact on the company’s third-quarter or full Fiscal Year 2022 results. Nonetheless, Berg believes that the third quarter and full-year guidance, which Paylocity is expected to announce in its upcoming earnings (for the second quarter of fiscal 2022) on February 3, may include the impact of the acquisition, if there is any.
Berg is confident that the ability to integrate disparate processes across third-party systems and automating them will give Paylocity a competitive edge, as automating the cumbersome process of implementation of applications into its HCM platform eliminates a “key pain point within the HCM industry”.
Moreover, this move is also a part of Paylocity’s product-focused growth strategy. “We believe that this once again supports Paylocity’s product-driven focus driving a long-term competitive advantage through continuing to create a better experience for customers,” Berg observed.
The analyst has reiterated a Buy rating on the stock with a price target of $325, which indicates a 69% upside from current price levels.
The rest of Wall Street, on the contrary, is slightly cautious and has a Moderate Buy consensus rating based on 7 Buys and 3 Holds. The average PCTY price target is $307.4.
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