On Wednesday, BTIG initiated coverage on Fiserv (NYSE:FI) stock, a leading financial technology provider, with a Buy rating and set a price target of $200. The firm's coverage begins with a confident outlook on the company's future performance, citing its substantial investment in platform development over the past three years.
According to the firm, these investments have positioned Fiserv for high single-digit to low double-digit growth in the coming years. Additionally, the firm anticipates that Fiserv's cash flow will increase at an even faster rate as operating margins expand and capital expenditure investments stabilize.
Fiserv is recognized as one of the largest merchant acquirers in the world and a top fintech provider, offering extensive distribution reach and capabilities that are unmatched by many competitors. The firm pointed out that Fiserv's significant annual free cash flow of approximately $5 billion facilitates a cycle of reinvestment in high-growth assets, while also allowing for the return of capital to shareholders and strategic business acquisitions.
The firm also highlighted Clover, Fiserv's cloud-based point-of-sale solution, which is expected to see over 28% growth through fiscal year 2026. The firm believes that Fiserv's unique distribution model will be instrumental in achieving this growth.
Despite Fiserv's premium valuation, trading at 17 times the firm's estimated adjusted earnings for fiscal year 2025, the firm considers the company's scale, growth trajectory, improving free cash flow profile, and history of prudent capital management as justifications for the stock's inclusion in a fintech investor's portfolio.
InvestingPro Insights
As BTIG commences coverage of Fiserv with a positive outlook, real-time data and insights from InvestingPro further underscore the potential strengths of the company. Fiserv's aggressive share buyback strategy, as indicated by InvestingPro Tips, suggests management's confidence in the company's value. With a robust market capitalization of $97.97 billion and a P/E ratio standing at 29.4, the company's financials reflect its stature in the Financial Services industry—a prominence also highlighted by InvestingPro Tips.
The company's growth is not just projected but evident in its recent performance. Revenue growth over the last twelve months as of Q2 2024 has been a solid 7.2%, with an even higher quarterly figure at 7.38%. This is coupled with an impressive gross profit margin of nearly 61%, which speaks to Fiserv's operational efficiency. Moreover, the company's stock is trading near its 52-week high, with the price just 0.56% shy of that peak, which could be a testament to investor confidence in its trajectory.
For investors considering Fiserv's potential, it's notable that analysts have revised their earnings upwards for the upcoming period, and the company is expected to be profitable this year, as per InvestingPro Tips. Interested readers can find additional insights and tips on Fiserv, including a total of 9 InvestingPro Tips, at: https://www.investing.com/pro/FI.
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