The Ratings Game: Fiserv stock gains after analyst upgrade, boost to buyback program

The Ratings Game: Fiserv stock gains after analyst upgrade, boost to buyback program

Shares of Fiserv Inc. were up more than 4% in midday trading Thursday after the company boosted its share-buyback authorization and was the subject of an analyst upgrade.

The financial technology company announced Thursday morning that it was increasing its share-repurchase authorization by 60 million shares. This will be in addition to the shares remaining under its existing buyback-authorization, which stood at 7.5 million as of the end of September.

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Separately, MoffettNathanson analyst Lisa Ellis upgraded Fiserv’s stock FISV, +4.20% to buy from neutral in a Thursday morning note titled “Fiserv: The Reports of My Death Are Greatly Exaggerated.” She wrote that Fiserv has been the worst-performing stock this year among the payments names she covers, underperforming the S&P 500 SPX, +0.23% by 17% as of Wednesday’s close, despite what she said is a “relatively high pandemic resistance.”

Ellis has only lowered her fiscal 2022 earnings estimates for Fiserv by 4% from what they were prior to the pandemic, while she’s reduced estimates for nearly every other payments name by more. Still, she said the stock has fallen out of favor with investors who seem worried about how Fiserv’s merchant-acquiring business will fare now that the pandemic is moving more spending online, as well as the recent leadership transition at the company.

Fiserv’s merchant-acquiring business “is in a healthier competitive position than is often perceived,” Ellis argued, even with the transition of more payment volume to online channels. “We believe the small, high-growth e-commerce specialty players like Adyen, Stripe, and PayPal are primarily taking market share from traditional, in-country players (who still command ~40% market share globally), not from Fiserv (a common bearish view)

Ellis expects that Fiserv could use its December investor day to provide additional information on its competitive position in e-commerce, which could serve as a catalyst for the stock. Other potential catalysts in her view are the company’s next earnings report, which she predicts will contain comprehensive full-year guidance, and progress on the company’s leverage goals.

Fiserv is aiming for a 2.7x ratio of net debt to earnings before interest, taxes, depreciation, and amortization, something Ellis said could happen in the second half of 2021 and allow the company to make acquisitions in the merchant-acquiring landscape, particularly around high-growth geographic regions or the e-commerce space.

The company also announced Thursday that it would be working with Exxon Mobil Corp. XOM, +0.12% on a contactless payment feature that makes use of Alphabet Inc.’s GOOG, +1.05% GOOGL, +1.04% upgraded Google Pay wallet.

Shares of Fiserv have lost 2.7% so far this year as the S&P 500 has risen 10.5%.