10:55 AM EDT, 10/01/2025 (MT Newswires) -- Paychex ( PAYX ) sees challenges in driving organic growth and Paycor recurring revenue, especially against the backdrop of a potentially softening small-business employment market, Morgan Stanley said Wednesday in a report.

The brokerage highlighted that Management Solutions' 21% growth was largely driven by a 17% contribution from Paycor, leaving organic growth at 4% or less, while PEO and Insurance growth slowed to 3% despite easier comps.

Paycor recurring revenue grew just 6% to 9% year-on-year, lagging its historical double-digit pace and Paychex's ( PAYX ) target, while persistent SMB bankruptcies highlight continued pressure in its core market, according to the report.

Morgan Stanley noted that although Paychex ( PAYX ) still represents a solid long-term payroll and HR outsourcing play, near-term execution in H2 2026 will be key to rebuilding investor confidence.

The firm maintained its equal weight rating on the stock and reduced its price target to $132 from $148.

Shares of the company were down more than 3% in recent Wednesday trading.

Price: 122.92, Change: -3.84, Percent Change: -3.03