Jefferies Upgrades Ceridian (CDAY) to Buy

Price target increased on long-term opportunities.

On Monday, Jefferies upgraded Ceridian (CDAY) from a Hold to a Buy. The investment firm also raised the price target on shares to $65 from around $58. Jefferies sees further upside from the company’s Dayforce revenues, and more long-term opportunities moving shares higher.

Ceridian already has an average Outperform rating among analysts, but shares rose 3.5 percent on the day following the upgrade.

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  • Ceridian is a human capital management (HCM) software company with business around the globe. Its Dayforce product is a cloud-based HCM platform offering all HR-backend solutions for payroll, benefits, workforce and talent management. The company was founded in 2013 and went public in 2018.

    Action to take: With flat earnings and a low profit margin right now, shares trade at a hefty 78 times forward earnings. Shares are pricing in growth that isn’t materializing right now, as reflected in a share price that’s risen over 48 percent already in the past year.

    Investors may want to look at buying a January 2020 $65 call option to bet on a further rally in shares—it’s a speculation that may make a quick 20 or 30 percent in the next few months should shares rise higher. But with shares already near a 52-week high, the upside may be limited.