From Laggard To Leader: Goldman Initiates Ceridian At Neutral

The Ceridian HCM Holding Inc CDAY story is one of transformation from a human capital management “laggard” to cloud “leader,” according to Goldman Sachs.

The Analyst

Goldman’s Jesse Hulsing initiated coverage on Ceridian with a Neutral rating and $34 price target. The target represents a 7.7 percent downside from the stock’s previous close.

Seven other analysts initiated coverage on Ceridian on Monday, get our full reporting in real-time by subscribing to Benzinga Pro and searching ticker “CDAY.”

The Thesis

Over the past five years, Ceridian has successfully leveraged its legacy Bureau cash generation to become a leading cloud services provider in the HCM space.

In fiscal 2017, cloud revenue made up 60 percent of the company’s total sales, up from 29 percent in fiscal 2014. From 2016 to 2017, revenue from Ceridian’s primary cloud offering, Dayforce, grew by 56 percent — significantly higher than its peer’s average growth of around 30 percent.

Hulsing expects Ceridian’s cloud business to sustain its 25 percent subscription growth through fiscal 2020, driving over 1,000 basis points of operating margin expansion.

The cloud business is projected to drive the company’s stock price almost by itself. “We view Cloud as comprising 94 percent of Ceridian’s enterprise value,” said Hulsing in a note.

Price Action

Shares of Ceridian were down 3 percent at $35.84 nearing Monday's close. The stock is up 15 percent since debuting on April 26.

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