Guggenheim has initiated coverage on two major HR software providers, Paycom Software and Paylocity Holding, as investors consider how artificial intelligence will affect businesses that rely on employee headcount growth.
The firm gave Paycom a Buy rating with a $270 price target, suggesting about 24% upside from current levels. Analysts said Paycom stands out in the human capital management (HCM) space thanks to its single-database architecture, which simplifies operations and supports innovation. Products like Beti for payroll, GONE for time-off management, and IWant, a new AI-powered interface, were highlighted as key drivers of future growth.
Guggenheim added that Paycom’s choice to run its own data centers gives it a fixed cost advantage as it scales, helping it maintain best-in-class margins compared with peers. With less than 5% penetration of its $35 billion U.S. market opportunity, the firm believes Paycom still has significant room to grow.
Paylocity received a more cautious start, with Guggenheim initiating at Neutral and no price target. Analysts acknowledged the company’s solid execution but pointed out risks from a softer labor market. Paylocity focuses mainly on firms with 50 to 249 employees, a segment that has remained relatively stable, but smaller businesses have shown weaker hiring trends. This could limit future growth momentum.
The report also noted that Paylocity has built a track record of consistently beating revenue guidance by more than 2%, which has supported its stock performance. However, Guggenheim warned it may be difficult to keep that streak going. While expansion into financial services could eventually provide new revenue streams, the analysts said it was too early to count on meaningful upside from that initiative.
Overall, Guggenheim’s view reflects a split stance: Paycom is seen as a long-term winner in the AI era, while Paylocity faces more near-term uncertainties tied to the labor market and growth consistency.