Market Overview

Citi: Ceridian Is 'Already Priced' For Its Market Share Potential

Citi: Ceridian Is 'Already Priced' For Its Market Share Potential

Human resources and payroll company Ceridian HCM Holding Inc (NYSE: CDAY) stands to gain market share, but this isn't enough reason to be a buyer of the stock, according to Citi.

The Analyst

Citi's Walter Pritchard initiated coverage of Ceridian's stock with a Neutral rating/High risk and $38 price target.

The Thesis

Ceridian, fresh off its April initial public offering, operates a legacy "bureau" payroll business that is already operating at a profit, while the cloud business continues to scale and should expand to account for 90 percent of total revenue by fiscal 2022, Pritchard said in the initiation note.

As encouraging as Ceridian's outlook may be, the stock's valuation of 7.5x fiscal 2019 EV/Rev is already trading at a 1.5 multiple turn higher compared to similarly growing and already profitable peers, the analyst said. 

It's reasonable to conclude investors are already accounting for the company's growth beyond fiscal 2019, Pritchard said. Citi's $38 price target is based on a 25x multiple on fiscal 2024 free cash flow to firm and discounted back at an 8.4-percent weighted average cost of capital.

Ceridian will likely be a market share winner over time, but the stock is already "priced for it," Pritchard said. 

Price Action

Ceridian shares were down 1.62 percent at$34.59 at the time of publication Tuesday. 

Related Links:

From Laggard To Leader: Goldman Initiates Ceridian At Neutral

The Market In 5 Minutes: WWE's Big Deal, Netflix And The Obamas, Sony-EMI And More

Latest Ratings for CDAY

Feb 2019Goldman SachsReinstatesNeutral
Jan 2019NeedhamInitiates Coverage OnBuy
Oct 2018Deutsche BankMaintainsHoldHold

View More Analyst Ratings for CDAY
View the Latest Analyst Ratings

Posted-In: Citi cloud human resources payroll Walter PritchardAnalyst Color Analyst Ratings Best of Benzinga


Related Articles (CDAY)

View Comments and Join the Discussion!

Latest Ratings

NVROMorgan StanleyUpgrades70.0
JWNGordon HaskettDowngrades0.0
GPNAtlantic EquitiesDowngrades0.0
WPAtlantic EquitiesDowngrades0.0
WGordon HaskettUpgrades0.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Trader Essentials
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Code Pink Plans Protest Aimed At iShares Aerospace ETF

It's Getting Harder To Buy A Home; Here's The Credit Score You Need