Paycom's weak revenue forecast hammers stock to nearly five-year low

By Niket Nishant

(Reuters) -Shares of Paycom Software lost nearly two-fifths of their value on Wednesday, wiping about $5.5 billion off the payroll processor's market capitalization after its fourth-quarter revenue forecast lagged estimates.

Paycom, one of the top percentage losers among NYSE-listed stocks, was last down nearly 38% at $154.05 and was trading at levels not seen since early 2019.

At least nine brokerages cut their price targets on the stock after the Oklahoma City-based company said it was expecting fourth-quarter revenue in the range of $420 million to $425 million. Analysts on average estimated $452.3 million, according to LSEG data.

Company executives said a jump in usage of its flagship product Beti, which increases efficiency for clients by letting their employees do their own payroll, was "cannibalizing" some revenues it would have otherwise earned.

"Now that more clients are achieving the ROI (return on investment) that Beti has to offer, it has eliminated certain billable items," CFO Craig Boelte said on a post-earnings call after markets closed on Tuesday.

Shares of competitor Ceridian HCM Holding pared some of their losses after the company forecast 2023 revenue above market expectations. Another rival Automatic Data Processing, which topped profit estimates last week, saw a nearly 3% decline in shares.

"Paycom's laser focus on driving automation and self-service payroll appears to have become a double-edged sword for the firm," Morningstar analyst Emma Williams wrote in a note.

Brokerage TD Cowen cautioned that trading in the stock would remain range-bound as investors seek more detail on a potential recovery.

"With higher uncertainty and lower visibility, we do not have a basis to recommend shares," TD Cowen said.

(Reporting by Niket Nishant in Bengaluru; Editing by Shilpi Majumdar)