On Friday, Susquehanna Financial Group increased its stock price target for Fiserv (NYSE:FI) shares to $230 from $190, while reiterating a Positive rating for the company. The firm's analysts highlighted several corporate initiatives that could potentially enable Fiserv to achieve double-digit revenue growth mid-cycle.
Among these initiatives are the stabilization of bank processing revenue through innovative products like CashFlow Central and XD, the phasing out of outdated bank cores coupled with upselling strategies, gaining market share with STAR network services, succeeding in the Issuer segment, and expanding the penetration of the Clover platform with additional software offerings.
The analysts at Susquehanna believe that these strategies are not fully reflected in the current stock valuation, which trades at approximately 16 times earnings. They suggest that if Fiserv can indeed grow its revenue by double digits during a mid-cycle period, the stock's current price does not adequately price in this potential.
In light of the anticipated revenue growth acceleration, Susquehanna has raised its estimates for Fiserv and expanded its valuation multiple. The revised price target of $230 takes into account the firm's expectations for the company's financial performance.
Fiserv, a provider of financial services technology, has been focusing on various growth avenues, including product innovation and market expansion. The company's efforts to sunset legacy systems and promote newer, more relevant products are part of its broader strategy to maintain a competitive edge in the financial technology sector.
The increased price target from Susquehanna reflects a confidence in Fiserv's ability to execute on its key initiatives and deliver the anticipated revenue growth. This adjustment in valuation serves as an indicator of the firm's positive outlook on Fiserv's financial prospects.
In other recent news, Fiserv, a leading global provider of payments and financial services technology solutions, has seen numerous adjustments to its stock price targets by various financial firms.
Baird, Bernstein, RBC Capital, TD Cowen, and BMO Capital have all expressed confidence in Fiserv's growth strategy and future prospects. Notably, Baird raised the price target on Fiserv shares to $210, while Bernstein set a new target at $244, both firms maintaining an Outperform rating.
Fiserv recently reported a 7% year-over-year increase in second-quarter 2024 revenue, reaching a record $5.11 billion, and a 31% increase in second-quarter earnings.
Despite an anticipated non-cash impairment charge of between $400 million and $600 million due to the expiration of its joint venture with Wells Fargo, Fiserv maintains its medium-term performance outlook, projecting 9-12% organic revenue growth and 14-18% adjusted earnings per share growth for 2025 and 2026.
On the strategic front, Fiserv has entered into a multiyear agreement to continue providing processing services for Wells Fargo's merchant customers and expanded its collaboration with PayPal (NASDAQ:PYPL) Holdings, Inc. to enhance the checkout process for U.S. merchants. These are some of the recent developments for Fiserv.
InvestingPro Insights
Fiserv's recent performance and financial metrics align with Susquehanna's optimistic outlook. According to InvestingPro data, Fiserv has demonstrated strong growth, with a 73.1% price total return over the past year and a 33.24% return in the last six months. This robust performance is reflected in the stock trading near its 52-week high, with the current price at 98.43% of its peak.
The company's financial health appears solid, with a market capitalization of $112.69 billion and revenue of $19.78 billion over the last twelve months as of Q2 2024. Fiserv's revenue growth of 7.2% during this period, coupled with a healthy gross profit margin of 60.96%, supports the potential for the double-digit growth projected by Susquehanna.
InvestingPro Tips highlight that Fiserv is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.72. This suggests that the stock may be undervalued considering its growth prospects, aligning with Susquehanna's view that the current valuation doesn't fully reflect the company's potential.
For investors seeking more comprehensive analysis, InvestingPro offers 12 additional tips for Fiserv, providing deeper insights into the company's financial position and market performance.
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