On Monday, Mizuho Securities adjusted its price target for Dayforce (NYSE:DAY), traded on the New York Stock Exchange under the ticker NYSE:DAY, to $80 from the previous target of $95, while reaffirming its Buy rating on the company's stock. The revision follows the company's first quarter results for the fiscal year 2024.
Mizuho's analysis indicates that despite the reduction in the price target, there are positive aspects to Dayforce's performance. The firm's FY24 recurring revenue forecast for Dayforce, excluding float, remains at $1,166 million. Additionally, Mizuho has increased its total revenue projection for the company to $1,733 million, marking a year-over-year growth of 14.5%, up from the previous estimate of 14.0% growth or $1,725 million.
The financial institution has also decided to maintain its EBITDA margin estimate for Dayforce at 28%. This decision comes after recognizing Dayforce's continued success in selling its comprehensive suite of Human Capital Management (HCM) products, the successful implementation of these systems, and a robust pipeline of enterprise-level deals.
In their commentary, Mizuho noted that Dayforce is well-positioned to sustain over 20% growth in its recurring revenue, excluding float. However, the adjustment in the price target is attributed to a broader contraction in market multiples for peer companies. Mizuho has applied a 9x multiple to Dayforce's next twelve months (NTM) cloud revenue and has decided not to assign any value to the company's Bureau services. The new price target of $80 implies an enterprise value to next twelve months revenue multiple of 8x, or 7x the projected revenue for the year 2025.
InvestingPro Insights
As Mizuho Securities reaffirms its confidence in Dayforce with an updated price target, real-time data from InvestingPro provides a broader picture of the company's financial health. With a current market capitalization of $9.05 billion and a high P/E ratio of 173.86, the company's valuation reflects investor expectations for future earnings growth. Despite a recent dip in stock price, with a 1 week total return of -7.57%, Dayforce's gross profit margin remains impressive at 48.37%, indicating strong operational efficiency.
InvestingPro Tips suggest that Dayforce's net income is expected to grow this year, and the company operates with a moderate level of debt, which could present a balanced risk profile for investors. Additionally, with 11 analysts revising their earnings downwards for the upcoming period, it's crucial for potential investors to consider both the opportunities and challenges ahead.
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