What Happened:
Shares of payroll and human resources software provider, Paylocity (NASDAQ:PCTY) fell 9.87% in the morning session after the company reported third-quarter revenue, gross margin, earnings per share, and free cash flow that exceeded analysts' expectations. Additionally, the revenue guidance for the full year was roughly inline with Consensus. Overall, it was a strong quarter for the company. However, the market was possibly expecting even better results from the company as the stock was down on the results. Another culprit could be fears around AI disrupting the business. In the press release announcing earnings, management highlighted AI Assist, "the HCM industry's first integration of generative AI built upon an with Open AI (the developer of ChatGPT)." The stock move may be signaling that the market views the new product as a defensive move rather than an offensive one.
What is the market telling us:
Paylocity's shares are quite volatile and over the last year have had 30 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
Paylocity is down 11.2% since the beginning of the year, and at $170.91 per share it is trading 37.2% below its 52-week high of $272.24 from August 2022. Investors who bought $1,000 worth of Paylocity's shares 5 years ago would now be looking at an investment worth $2,950.
Is now the time to buy Paylocity? Access our full analysis of the earnings results here, it's free.