Stock Story -
What Happened: Shares of payroll and human resources software provider, Paylocity (NASDAQ:PCTY) fell 9.5% in the morning session after the company reported fourth-quarter results and provided full-year revenue guidance that was below expectations. Paylocity highlighted macro challenges that posed a headwind to the guidance provided. Management added during the earnings call, "To date, in fiscal 2024, we've seen sales cycles upmarket take longer, and it has taken longer for our new reps to ramp up, which has pressured productivity and new sales volumes in January and has weighed on fiscal 2024 growth."
On the other hand, revenue and EPS exceeded expectations during the quarter. Overall, the results were weak, with the market likely to be worried about the challenges highlighted during the earnings call.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Paylocity? Find out by reading the original article on StockStory.
What is the market telling us: Paylocity's shares are quite volatile and over the last year have had 8 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 9 months ago, when the stock dropped 9.9% on the news that the company reported third-quarter revenue, gross margin, earnings per share, and free cash flow that exceeded analysts' expectations. Additionally, the revenue guidance for the full year was roughly inline with consensus.
Overall, it was a strong quarter for the company. However, the market was possibly expecting even better results from the company as the stock was down on the results. Another culprit could be fears around AI disrupting the business. In the press release announcing earnings, management highlighted AI Assist, "the HCM industry's first integration of generative AI built upon an with Open AI (the developer of ChatGPT)." The stock move may be signaling that the market views the new product as a defensive move rather than an offensive one.
Paylocity is up 1% since the beginning of the year, but at $164.43 per share it is still trading 27.5% below its 52-week high of $226.85 from July 2023. Investors who bought $1,000 worth of Paylocity's shares 5 years ago would now be looking at an investment worth $1,974.