Fiserv, Inc.

FISV Details

Fiserv, Inc. (NASDAQ: FISV) is a global payments and financial services technology company. The company provides account processing and digital banking solutions, card issuer processing and network services, payments, e-commerce, merchant acquiring and processing, and the Clover cloud-based point-of-sale solution. Its operating segments are 1) Merchant Acceptance, which provides merchants all around the world with a comprehensive range of products and services, 2) Financial Technology, which offers financial institutions with the technology they require to conduct their businesses and 3) Payments and Network, which includes the products and services needed to process digital payments.

Latest News:

• Collaboration with Union Pay: On February 07, 2022, UnionPay International, a wholly-owned subsidiary of China UnionPay, has extended its partnership with FISV. Through this collaboration, UnionPay will expand globally, which will make it easier to issue virtual and physical UnionPay cards in overseas markets. UnionPay will also leverage the power of Fiserv's worldwide footprint and capabilities to enable other businesses outside of Mainland China to accept UnionPay cards.
• Fueling Growth through Horizontal Acquisition: On February 07, 2022, FISV has signed an agreement to acquire Finxact, Inc., the developer of the cloud-native banking technology. The transaction furthers FISV's digital banking strategy by expanding the company's leading account processing, digital, and payments solutions and positioning FISV as the go-to partner for clients looking to scale, accelerate, and expand the digital banking experiences they provide to their customers. FISV was an early investor in Finxact and will purchase the remaining ownership interest for approximately USD 650 million under the transaction terms.

Q4FY21 Results:

• Growth in Topline: The company reported a YoY growth of 11.09% in total revenue to USD 4.26 billion in Q4FY21 (ended December 31, 2021) from USD 3.83 billion in Q4FY20, driven by 17.73% YoY growth in Merchant Acceptance segment.
• Improvement in Profitability: In Q4FY21, FISV's net income increased to USD 333 million from USD 300 million in Q4FY20.
• Cash and Debt Position: The company had USD 835 million in cash and cash equivalents as of December 31, 2021, and total debt of USD 21.24 billion.

Key Risk:

• Competition Risk: FISV operates in a highly competitive IT Services industry and faces direct competition from financial services technology and payment system providers, data processing affiliates of large companies, processing centres owned or operated as user cooperatives and others. In addition, the managed care industry and complementary industries have witnessed a lot of merger and acquisition activity. Should this industry consolidate further, it could impair the financial and operational performance of the company.

Outlook:

2022 Performance Outlook (Source:  Earnings Presentation Q4FY21, February 8, 2022) 

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation:

FISV's stock price has fallen 14.63% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 92.06 to USD 127.34. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 120.79.

Considering the correction in the stock price, inorganic growth initiatives, collaboration with Union Pay, industry above net margin, encouraging outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 97.07, down 0.84% as of February 15, 2022.

Three-Year Technical Price Chart (as on February 15, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Disclaimer

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