KeyBanc analyst Alex Markgraff upgraded Fiserv, Inc (NYSE:FI) to Overweight with a $160 price target.
Most names in Markgraff’s payments and FinTech coverage universe are trading at multi-year trough multiples (five-year range), and a broader universe considering ~50 payments and FinTech stocks are trading at a ~25% discount to the near-decade Next Twelve Months (NTM) EV/R average (5.8x current) and a ~low single digit % premium to the near decade.
NTM EV/EBITDA average (18.5x current). Current multiples reflect an improvement from 3Q23-end (1x EV/R and 3x EV/EBITDA improvement).
The re-rating is predicated on an improved outlook in merchant solutions’ growth runway.
The analyst modeled revenue and profitability ahead of the Street and noted further potential for estimated upside upon FY24 guidance affirmation and progress against FY24 GTM initiatives, assuming continued macro stability (ex-Argentina).
Also Read: Fiserv CEO Confident in Growth After Q3 Outperformance, Raises 2023 Guidance
Merchant solutions growth opportunity is not yet fully contemplated, the analyst flagged.
Clover and Carat’s execution set the stage for potential estimate revisions higher. The balanced spend base offered more defensive positioning.
Summing up the analyst bull case, consumer resilience buoys spending levels, and consumer wallet concerns prove misguided.
The analyst also flagged merchant upside surprise from better-than-expected Clover growth and back-book conversion, and Carat wins to a lesser extent.
Markgraff projected Q4 revenue of $2.52 billion versus a consensus of $4.69 billion and EPS of $0.97 against consensus of $2.15.
The 2024 catalysts included affirmation of 2024 guidance and estimate revisions and merchant growth as per the analyst.
Price Action: FI shares traded higher by 1.53% at $134.60 on the last check Monday.
