- Credit Suisse analyst Kevin Mcveigh maintained Paychex, Inc PAYX with an Outperform and cut the price target from $165 to $140.
- While his view remains overly bullish, he recognizes that the -4% selloff in the PAYX stock was likely due to macroeconomic uncertainty impacting the relative market amid decelerating growth, mainly due to tougher comparisons. The selloff occurred despite the F4Q beat and FY23E above expectations amid retention at structurally higher levels.
- Paychex introduced FY23 including +7-8% Y/Y revenue fueling 9-10% adj. EPS amid 40-41% adj. EBIT margin.
- The results reinforce his recent HCM software thesis that the market consistently underappreciates the current addressable market and growth.
- Paychex is poised to benefit from higher rates as client funds are above 2007-08.
- Interest income is currently lower, but higher Fed funds rate expectations of 3.5% by the end of the year, as per Credit Suisse, offers potential upside.
- As a reminder, he estimates every 25bps increase in rates would add about $0.01/share.
- Price Action: PAYX shares traded higher by 0.77% at $115.73 on the last check Thursday.
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