Fiserv Gains From Growth in Clover Despite Increased Competition

Fiserv, Inc. FI shares have jumped 41.7% in the past year, outperforming the industry and the Zacks S&P 500 composite’s growth of 13.8% and 5.1%, respectively.One-Year Price Performance Image Source: Zacks Investment Research The company reported mixed fourth-quarter 2024 results. FI’s adjusted earnings per share of $2.51 beat the consensus mark by 1.2% and gained 14.6% year over year. Adjusted revenues of $4.9 billion missed the consensus estimate by 1.1% and declined marginally on a year-over-year basis.How is FI Doing?While Fiserv’s legacy merchant operations should rise with transaction volumes, Clover is the company’s major source of growth. Clover’s rising volumes and growing ancillary revenues are enhancing Fiserv's performance. Its revenues gained 29% year over year in the fourth quarter of 2024.In November 2023, management expected revenues of $4.5 billion for Clover in 2026, suggesting a 28.5% year-over-year growth rate. The goal seems ambitious. However, for the preceding two quarters, it has surpassed the target. Clover's fourth-quarter 2024 annualized payment volume saw 14% growth.Fiserv’s business model blends recurring revenues and a high incremental margin of a scaled processing business with higher growth and margins. Moreover, it remains consistent with providing cloud-based software and service offerings.FI's current ratio (a measure of liquidity) at the end of fourth-quarter 2024 was 1.06, higher than 1.04 in the year-ago quarter due to a rise in cash and cash equivalents. A current ratio of more than 1 indicates efficient short-term debt coverage capability.Fiserv has been consistent with share repurchases. In 2021, 2022 and 2023, FI repurchased 23.3 million, 25.4 million and 40 million shares for $2.6 billion, $2.5 billion and $4.7 billion, respectively. Such moves boost investor confidence.Meanwhile, the company’s core banking products and services are part of a highly competitive market. Entry of several non-banking bodies is increasing competition within the industry, and it is anticipated to grow as market entrants multiply in number and the existing ones expand their products and services. FI might fail to maintain strong and long-term client relationships amid stiff competition.Integration risk prevails over the company due to its frequent acquisition strategy. Buyouts can hurt FI's balance sheet in the form of high goodwill and intangible assets. Moreover, frequent acquisitions are distractions for management, impacting organic growth.FI’s Zacks Rank & Stocks to ConsiderFiserv carries a Zacks Rank #3 (Hold) at present.Some better-ranked stocks in the broader Zacks Business Services sector are PayPal Holdings, Inc. PYPL and Palantir Technologies Inc. PLTR.PayPal Holdings has a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.PYPL has a long-term earnings growth expectation of 11.7%. It delivered a trailing four-quarter earnings surprise of 14.3%, on average.Palantir Technologies carries a Zacks Rank of 2 at present. It has a long-term earnings growth expectation of 31.4%.PLTR delivered a trailing four-quarter earnings surprise of 12.7%, on average.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fiserv, Inc. (FI): Free Stock Analysis Report PayPal Holdings, Inc. (PYPL): Free Stock Analysis Report Palantir Technologies Inc. (PLTR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks