(Reuters) -Shares of Paycom Software lost over a third of their value before the bell on Wednesday, on track to wipe more than $5 billion off the payroll processor’s market capitalization, after its fourth-quarter revenue forecast lagged estimates.
Paycom, one of the top percentage losers among NYSE-listed stocks in premarket hours, was last down nearly 36% at $155.89. The stock is set to open at its lowest since early 2019, if current levels hold.
At least five brokerages cut their price targets on the stock after the Oklahoma City-based company said it was expecting fourth-quarter revenue in the range of $420 million to $425 million. Analysts on average estimated $452.3 million, according to LSEG data.
Company executives said a jump in usage of its flagship product Beti, which increases efficiency for clients by letting their employees do their own payroll, was “cannibalizing” some revenues it would have otherwise earned.
“Now that more clients are achieving the ROI (return on investment) that Beti has to offer, it has eliminated certain billable items,” CFO Craig Boelte said on a post-earnings call after market closed on Tuesday.
Shares of competitors Ceridian HCM Holding and Automatic Data Processing also lost over 2% each in premarket trading.
“Paycom’s laser focus on driving automation and self-service payroll appears to have become a double-edged sword for the firm,” Morningstar analyst Emma Williams wrote in a note.
Brokerage TD Cowen cautioned that trading in the stock would remain range-bound as investors seek more detail on a potential recovery.
“With higher uncertainty and lower visibility, we do not have a basis to recommend shares,” TD Cowen said.
(Reporting by Niket Nishant in Bengaluru; Editing by Shilpi Majumdar)
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