ADP: Upgrade to Equal Weight; Fundamentals Stabilizing, More Balanced Risk/Reward

研报英文原文证据摘录

ADP: Upgrade to Equal Weight; Fundamentals Stabilizing, More Balanced Risk/Reward

es one-off items

Source: Company Data, Wells Fargo Securities estimates, and Factset.

AI fears not unfounded, but seem overdone. ADP has sold off in recent months on NA = Not Available, NC = No Change, NE = No Estimate

fears of AI disruption that we view as overdone. ADP’s core offerings (payroll, HR) are Jason Kupferberg

mission-critical systems of record, unlikely to be heavily disrupted by vibe-coding or Equity Analyst | Wells Fargo Securities, LLC

AI-centric start-ups. Fears that AI will significantly reduce human employment also Jason.Kupferberg@wellsfargo.com | 212-214-5457

appear overstated, as discussed recently by WFS Equity Strategy team. Internally, ADP is Tyler DuPont, CFA

deploying AI to drive sales efficiencies and enhanced customer support. Associate Equity Analyst | Wells Fargo Securities, LLC

Tyler.J.Dupont@wellsfargo.com | 212-214-5431

View F27 ests as achievable (Ex. 3). Despite solid hiring and healthy bookings trends, Cassie Chan

consensus F27 revs estimate of 5.9% y/y implies 50bps decel vs. F26 and is just below Equity Analyst | Wells Fargo Securities, LLC

Cassie.Chan@wellsfargo.com | 212-214-5331

ADP's MT target of 6%-7%. This compares with PAYX, where the Street models 100bps+

org cc growth accel into F27 despite continued Paycor execution risk. ADP has also shown Melissa Chen, CFA

better-than-expected margin performance FYTD, and for F27, we expect continued Associate Equity Analyst | Wells Fargo Securities, LLC Melissa.Chen@wellsfargo.com | 212-214-5346

expansion in line with MT guide of 50-75bp y/y growth.

Valuation has become less onerous (Ex. 4). So far YTD, shares have fallen ~17% and

now trade at ~17.5x C27 P/E.