Overview
Guggenheim has lowered its price target for Paycom Software (PAYC) to $180.00 from $210.00 and kept a Buy rating following the company’s fourth-quarter report and forward guidance for 2026. The adjustment follows Paycom’s directional guidance on recurring revenue and an initial revenue projection that came in under analyst expectations.
Guidance versus expectations
Management’s 2026 guidance included a Recurring and Other revenue growth range of 7-8%, short of the 9.8% consensus. Separately, the company’s initial 2026 revenue guidance projected growth of 6.5% to $2.185 billion, beneath the analyst consensus estimate of $2.225 billion, which equates to 8.5% growth. These figures have contributed to downward pressure on the stock.
Operational and margin strength
Despite the softer top-line outlook, Guggenheim pointed to several durable operational metrics that it views positively. Annual revenue retention rose to 91% in 2025. The company reported a gross profit margin of 86.79% and a return on equity of 29% over the last twelve months. Paycom also added more new customers in 2025 than it did in the two prior years combined and saw faster expansion among clients with over 1,000 employees compared with its overall revenue base.
Valuation and cash flow observations
At after-hours levels of about $113, Guggenheim calculated that Paycom traded at roughly 3x EV/NTM Recurring revenue and 12x EV/NTM free cash flow (FCF). The firm judged those multiples to understate Paycom’s structural margin advantages and favorable business trends, and it flagged potential normalization of Free Cash Flow over the coming year as a positive dynamic.
Other analyst moves
KeyBanc Capital Markets reduced its price target on Paycom to $195.00 from $250.00 while maintaining an Overweight rating and acknowledging improved customer retention and client growth. Needham reiterated a Hold rating, citing the modest growth outlook reflected in management’s guidance. These responses illustrate a range of analyst views, from continued upside conviction to more cautious stances rooted in slower near-term growth.
Recent results and market performance
Paycom reported fourth-quarter 2025 earnings per share of $2.45 and revenue of $544.3 million, which slightly exceeded expectations. Even so, the conservative initial 2026 revenue outlook has been a source of concern for investors. The stock is trading materially below many analyst targets; at $118.71 it sits beneath a target range that spans $115 to $240 and remains well under the consensus implied value. Over the last six months the stock has declined by 44.62%.
Market signals and research tools
Research tools assessing Paycom’s valuation suggest the shares may be undervalued despite recent declines. One fair value assessment indicates undervaluation, and additional analytic tips — 12 in total identified by the research platform referenced — include technical signals such as a relative strength index (RSI) that points to oversold territory. Those tools are part of a broader research package intended to surface investment ideas and monitor risk-reward profiles across stocks.
Key points
- Guggenheim lowered its Paycom price target to $180 from $210 but maintained a Buy rating, citing strong retention and margins.
- Paycom’s 2026 Recurring and Other revenue growth guidance of 7-8% and initial revenue projection of 6.5% to $2.185 billion fell below consensus expectations.
- Analysts reacted variably: KeyBanc trimmed its target to $195 while keeping Overweight; Needham reiterated Hold.
Risks and uncertainties
- Revenue guidance risk - Management’s 2026 recurring revenue and total revenue estimates are lower than consensus, which could continue to pressure the stock if growth fails to accelerate.
- Valuation and market reaction - The market’s repricing of the stock, including a roughly 44.62% decline over six months, raises the uncertainty of when or if sentiment will realign with fundamental metrics.
- Cash flow normalization - Although Guggenheim flagged potential FCF normalization as a positive, realization of that improvement is not guaranteed and remains a source of execution risk.
Conclusion
Guggenheim’s decision to lower its target while maintaining a Buy rating reflects a balance between near-term caution and confidence in Paycom’s margins, retention and enterprise client growth. Mixed analyst responses underscore the tension between solid unit economics and a subdued growth outlook for 2026. Investors assessing Paycom will likely weigh the company’s structural profitability and retention metrics against the implications of management’s conservative guidance.