Paycor: Initiating Coverage With No-Moat Rating and $26 Fair Value Estimate

We are initiating coverage of Paycor HCM with a $26 fair value estimate and no-moat and very high uncertainty ratings. Paycor provides payroll and human capital management solutions to small and midsize clients in the United States via a software-as-a-service model. It is well positioned to take share of the expansive and highly fragmented small- and midsize-business payroll and HCM market through industry consolidation and rising demand for sophisticated HCM solutions. We assume the primary share donors will be in-house and regional solutions that dominate this market but lack the product depth and breadth to meet evolving payroll and HCM needs. The shares currently trade about in line with our valuation.