Dayforce Inc (DAY) Stock Forecast & Price Target

Dayforce's total revenue increased by 9.5% year-over-year, primarily driven by significant growth in its recurring revenue, which rose 14% year-over-year, indicating strong customer retention and engagement. Professional services revenue also experienced robust growth of 22.5% year-over-year, contributing to overall financial health. The company is expected to achieve low 20% core revenue growth in the coming years, supported by successful customer acquisition, solid gains in per employee per month (PEPM) metrics, and a favorable profitability outlook, positioning it well in its competitive landscape.

The analysis indicates a decline in key financial metrics for Dayforce, marked by an 80bps decrease in gross margin to 48.1% and a non-GAAP operating margin of 24.7%, which fell short of expectations by 220bps. Additionally, there was a significant year-over-year reduction in operating cash flow, which decreased by $60.6 million to $31.2 million, alongside a free cash flow drop of $58.4 million to $5.0 million, resulting in a $0.24 EPS miss. These financial challenges, combined with potential customer retention issues and competitive pricing pressures, raise concerns about Dayforce's profitability prospects and long-term market position.