By Nate Wolf
Shares of Paycom Software fell sharply Thursday even after the human resources software company met earnings expectations. Concerns about the strength of the job market might be weighing on the stock.
Paycom posted adjusted earnings of $1.94 a share for the third quarter, in line with analysts' consensus forecast of $1.95, per FactSet. Revenue totaled $493 million, up 9% from last year and a tick above Wall Street's expectations. The company reiterated revenue and earnings guidance for the full year.
The stock, however, dropped 12% to $161.21 on Thursday, putting it on pace for its lowest close since Oct. 8, 2024, according to Dow Jones Market Data.
While investors wanted more, analysts largely were satisfied with the print.
"Paycom delivered good 3Q results driven by internal efficiency gains and improving product demand," said Oppenheimer analyst Brian Schwartz. He noted that recurring revenue and adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization, came in above consensus.
Paycom didn't beat revenue by a significant margin, as it tends to do in the third quarter, but its overall trajectory is positive, Schwartz argued. Oppenheimer reiterated a Perform rating for the stock.
KeyBanc Capital Markets reiterated an Overweight rating, citing "solid traction" for Paycom's IWant artificial-intelligence engine, which provides answers pulled from worker data. Paycom has invested around $100 million in data centers and AI this year to support the IWant rollout, but this capital spending is mostly in the rearview mirror, it said.
Nevertheless, KeyBanc lowered its price target on the stock to $250 from $290. The reason: "incremental labor market uncertainty," as analyst Jason Celino put it.
Staffing firms, payroll processors, and other human resources tools tend to see their stocks weaken ahead of turbulence in the job market. Paycom and the payroll software company Paylocity Holding have flashed particularly worrisome signals in recent weeks, Barron's reported last week .
While private jobs data from ADP held up well in October, recent layoffs at companies like United Parcel Service and Amazon.com have spooked some market watchers. Meanwhile, investors haven't received official employment data from the government in more than a month due to the federal shutdown.
Paycom's per-employee pricing model makes it vulnerable to a potential slowdown in employment, said UBS analyst Kevin McVeigh. And while the company's AI adoption will help it "drive sustainable growth," McVeigh says, the threat of macroeconomic choppiness is too strong to ignore.
UBS reiterated a Buy rating but slashed its price target to $245 from $285 in a research note.
Write to Nate Wolf at nate.wolf@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 06, 2025 13:00 ET (18:00 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
Comments