Citi sees 40% gain for this fintech, likes its big dividend payout too
Paychex is likely to bounce as investors warm up to signs of growth in the stock and look to benefit from its recent dividend increase, according to Citi. The bank upgraded the fintech stock to buy from neutral. It also hiked its price target on shares to $140 from $99, implying 39% from Friday’s close. “Industry insights are showing AI solutions driving higher client retention, new pricing opportunities, and lowering delivery costs for PAYX, while the macro environment (not a major factor despite perception) is becoming a slight tailwind due to higher new business starts and steady-to-falling bankruptcy rates (employment and float income [3% of total revs], have essentially zero impact on rev growth),” analyst Bryan Keane said Sunday in a note to clients. Paychex has shed 34% over the past 12 months, as concerns over its operating costs and the health of the broader labor market have weighed on shares. PAYX 1Y mountain Shares have fallen 34% over the past 12 months. But Citi thinks Paychex is likely to show strong signs of growth and an improved full-year financial outlook when it reports earnings later this month. “Led by the recent surge in bookings growth … we expect PAYX organic rev growth to accelerate in FY27 (reversing a four-year trend),” Keane wrote. The analyst added that Paychex’s recent dividend increase limits downside, enabling the stock to remain “attractive to investors while valuation remains well below historical norms.” Paychex on May 1 increased its dividend by 11 cents, or 10%, to $1.19 per share. Citi’s call goes against consensus on the Street. Of the 19 analysts that cover Paychex, 14 have a hold on the stock, LSEG data shows.
