Paycom Software, Inc. (NYSE: PAYC) shares nosedived on Wednesday after the company issued a disappointing fourth-quarter revenue forecast.
The company forecasts its fourth-quarter revenue to range between $420 million and $425 million. According to LSEG data, analysts had been anticipating revenue of $452.3 million.
Company executives pointed to the surge in usage of its flagship product, Beti, as the main culprit for revenue drop. Beti is designed to enhance efficiency for clients by allowing their employees to manage their payroll tasks independently.
Paycom CFO Craig Boelte revealed during a post-earnings call that as more clients achieved a return on investment (ROI) through Beti, it eliminated certain billable items, contributing to the unexpected revenue shortfall.
Morningstar analyst Emma Williams noted,
“Paycom’s laser focus on driving automation and self-service payroll appears to have become a double-edged sword for the firm.”
Brokerage TD Cowen cautioned that the future of Paycom’s stock remains uncertain as investors seek more details on a potential recovery. The firm stated,
“With higher uncertainty and lower visibility, we do not have a basis to recommend shares.”
Paycom, one of the worst-performing stocks on the NYSE, is trading at $151.35, down 38% from the previous session. This price level has not been seen since early 2019.
Meanwhile, shares of competitor Ceridian HCM Holding (NYSE: CDAY) pared some of its losses after announcing a better-than-expected revenue forecast for 2023. On the other hand, another rival, Automatic Data Processing (NASDAQ: ADP), which had outperformed profit estimates last week, saw a 5% decrease in its stock value.