Human Capital Management cloud software company
Ceridian HCM (CDAY 36.52, -0.30, -0.81%) has stormed out of gate, pricing its April 26 IPO above
expectations ($22 vs. $19-$21) and charging higher by nearly 70% since then.
Generally speaking, cloud software IPOs have been hot commodities of late with
names like ZScaler (ZS, +71%), Zuora (ZUO, +41%), and Pluralsight (PS, +39%)
also generating impressive gains. So, clearly investor sentiment has landed on
the bullish side for CDAY and others in the cloud software IPO group.
With the quiet period expiring today for CDAY, analysts' involved with the IPO have their first opportunity to opine and provide estimates on the stock. As you'll see below, the initiations were mixed, illustrating that sentiment is varying. Given the IPO's sharp gains, though, it shouldn't come as a surprise that some analysts would be a little more cautious on the name at this point.
CDAY is a global human capital management (HCM) software company. Dayforce, its flagship cloud HCM platform, provides human resources, payroll, benefits, workforce management, and talent management functionality. Dayforce was built as a single application from the ground up that combines a modern, consumer-grade user experience with proprietary application architecture, including a single employee record and a rules engine spanning all areas of HCM.
The platform is designed to ease administrative work for both employees and managers, creating opportunities for companies to increase employee engagement. Further, its platform is used by organizations, regardless of industry or size, to optimize management of the entire employee life cycle, including attracting, engaging, paying, deploying, and developing their people.
CDAY's solutions deliver the right data to the right user at the right time for actionable intelligence and a superior employee experience. Its scalable platform is built on modern cloud technologies with a single, flexible rules engine capable of addressing complex global regulatory requirements, combined with a data architecture that can continuously calculate payroll throughout the pay period and a single database that enables advanced insights and predictive analytics.
Now, circling back to today's news, there were quite a few initiations hitting the wires. In fact, as of this report, there were nine initiations, with three landing on the bullish side and six on the more cautious side. On the positive side, Wells Fargo assigned an Outperform while Mitsubishi UFJ gave CDAY an Overweight, each with a $46 target -- about 27% higher than current prices. The other bullish initiation was an Overweight at Piper Jaffray with a price target of $41.
On the cautious side, the three that really stand out are Barclays' Equal Weight and target of $36, and Goldman Sachs' and JP Morgan's Neutral and $34 price targets, slightly below current prices.
In conclusion, CDAY's run higher has made the stock more expensive with a trailing P/S of around 7x now. At the time of its IPO, its P/S was roughly 4x. With fairly modest top-line growth rates in the low double-digit area, some analysts may be feeling the stock is more fully valued now, limiting the near-term upside potential.
- OUR VIEW
- LEARNING CENTER