Paychex Access payroll card in Brookline, Mass.
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Shares of Paychex dropped on Wednesday after Bank of America downgraded the stock due to its “excessive valuation” and “underwhelming fundamentals.”
The bank slashed its rating for the employment services company to underperform from neutral, while keeping its 12-month price target of $82 unchanged. Shares of Paychex fell 3.57% to about $81.77 on Wednesday following the downgrade.
Paychex has returned nearly 26% this year so far, but “this outperformance has been driven almost exclusively by multiple appreciation,” Jason Kupferberg, Bank of America’s research analyst said in a note sent to clients during market hours.
“We believe the higher multiple is in part a result of the falling 10-year yield, rather than improving fundamentals, and as a result, we view the multiple re-rating as lower quality and less sustainable…on the basis of underlying fundamentals, we view shares are…