UBS Affirms ‘Neutral’ Rating on Automatic Data Processing (ADP) Following Guidance Adjustment

Automatic Data Processing, Inc. (NASDAQ:ADP) is one of the 13 best software stocks to buy now. On June 13, UBS reiterated a ‘Neutral’ rating on the stock but cut the price target to $315 from $323. The adjustment follows significant updates at the company’s investor day in New York City.

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The software company revised its revenue growth expectations to 6% and 7% at the event. Management also reiterated they expect earnings per share to grow by between 9% and 11%, a 200 basis point reduction from 2021 predictions.

Automatic Data Processing’s Professional Employer Organization Segment accounts for about 35% of total revenue and is expected to grow by 6% and 8%, down from a previous forecast of 10% and 12%.

UBS remains optimistic about the company’s long-term prospects, as it has a 15% market share in the human capital management market. Consequently, it is expected to generate significant value given that the total addressable market is expected to expand to $180 billion from $175 billion. Nevertheless, it maintains a neutral stance as it monitors the impact of technology and distribution investments on margins.

Automatic Data Processing, Inc. (NASDAQ:ADP) is a software application company that provides solutions that automate data handling, particularly through software and services, to streamline business operations.

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