Paycom Drops In After-Hours Due To Unemployment Headwinds

Shares of Paycom fell over 2% in extended trading on Tuesday after the human capital management software provider reported a 17.3% decline in 2Q earnings.

Paycom’s (PAYC) 2Q revenues of $181.6 million fell short of analysts’ expectations of $183.9 million. Its adjusted EPS dropped 17.3% to $0.62 year-on-year, reflecting payment deferrals by clients, decreased headcount, and increased operating expenses. However, 2Q earnings came in line with Street estimates.

The company stated that “because we charge our clients on a per-employee basis for certain services we provide, decreased headcount at our clients negatively impacted our recurring revenue in the second quarter of 2020.”

Ahead of its earnings, on July 30, Credit Suisse analyst Brad Zelnick raised the stock’s price target to $205 (28.2% downside potential) from $185 but maintained a Sell rating. In a research note, Zelnick said “The environment remains highly uncertain with furloughs turning into permanent job losses, companies continuing to right size, and persistently high jobless claims.”

Overall, PAYC has Hold analyst consensus. The average price target of $289.33 implies upside potential of 1.3%. (See PAYC stock analysis on TipRanks).

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