What Happened?
Shares of HR and payroll software provider Paylocity (NASDAQ: PCTY) fell 5.7% in the morning session after it reported first-quarter fiscal 2026 results that showed a significant miss on earnings per share.
Although the company's revenue increased by 12% year-over-year to $408 million, its earnings per share of $0.86 fell drastically short of the $1.57 that was forecast. This represented a miss of over 45%, signaling a sharp decline in profitability to investors. The disappointing results prompted a negative reaction from the analyst community. For instance, Citizens lowered its price target on the shares from $270.00 to $245.00, a decrease of more than 9%, reflecting concerns about the company's performance.
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? Access our full analysis report here.
What Is The Market Telling Us
Paylocity’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 3 months ago when the stock gained 3.3% on the news that private equity firm Thoma Bravo lined up a bid to acquire one of its competitors, Dayforce (DAY). The potential acquisition of competitor Dayforce (DAY) sent its shares rocketing over 20% and created a positive ripple effect across the human resources technology sector. According to a Bloomberg report, Thoma Bravo is looking to take Dayforce private in a deal that could be announced within weeks, valuing the company at around $8.4 billion. This news highlights a growing trend of consolidation within the software and HR Tech industries, where private equity firms are increasingly targeting established companies. For investors, a major acquisition like this often leads to a re-evaluation of valuations for similar companies in the space, such as Paylocity, on the speculation of further M&A activity or simply because the sector is seen as more valuable.
Paylocity is down 28.3% since the beginning of the year, and at $139.77 per share, it is trading 35.8% below its 52-week high of $217.86 from February 2025. Investors who bought $1,000 worth of Paylocity’s shares 5 years ago would now be looking at an investment worth $738.23.
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