Paycom Software (PAYC) Stock Forecast & Price Target

Paycom Software has demonstrated robust growth, with its client count increasing from 12,800 in 2014 to over 37,500 in 2024, resulting in a compound annual growth rate (CAGR) of 16% during this period. The company is benefiting from rising interest rates and has successfully expanded its offerings by cross-selling additional modules to its growing customer base. Additionally, capital expenditures have increased, reflecting the company's ongoing investment in its platform to support future growth initiatives, which further solidifies a positive outlook for its financial performance.

Paycom Software is facing significant challenges as reflected in its projected New Annual Recurring Revenue (ARR), which is anticipated to decline by 15%, despite an expected 11% year-over-year growth in Recurring and Other revenue for 4Q25, amounting to $516 million. The company's gross margin is also expected to be negatively impacted due to depreciation related to a $130 million investment in GPUs, potentially leading to lower margin percentages than current market consensus estimates. Furthermore, a notable decline in customer retention from 94% in 2021 to 90% in 2023 raises concerns about the sustainability of Paycom's growth, primarily attributed to increased competition and challenges associated with the rollout of their Beti platform.