Fiserv Is Up 50% This Year and Can Go Another 50% Higher

Key Points

• Fiserv is the leading fintech providing merchant and financial services globally. 
• The growth, analyst revisions, and institutional buying trends support the uptrend in the stock price. 
• Robust capital returns will continue to reduce the share count and strengthen fundamental tailwinds. 

Fiserv's NYSE: FI stock rallies in 2024 because of its position in the financial services industry and growing business leverage. The company is the #1 choice for payment and card services globally for merchants and financial institutions, growing its reach while its clients deepen penetration of a growing middle class. The growing middle class drives consumption of goods and services across industries and verticals, and with consumption comes the need for financial middlemen like Fiserv. Estimated at over 4 billion in 2024, the middle class is expected to grow by 25% by the decade's end, providing ample opportunity for this fintech that it capitalizes on today.  

Fiserv Raises Guidance, Leads Market to New Highs

Fiserv’s FQ3 results were mixed relative to the consensus reported by MarketBeat but are solid nonetheless. The company reported $4.88 in adjusted revenue, up 7% YoY, missing the consensus by only a slim margin. The growth was driven by both segments, with Merchant Solutions up a strong 29% and Financial Solutions up a slower but still solid 9%. Organically, revenue is up by 15% and compounded by a wider margin, which is expected to stick. Adjusted operating margin increased 170 basis points to 40.2%, driving substantial cash flow and free-cash-flow improvement. 

Fiserv’s cash flow and free cash flow are central to the investment. It is growing FCF at an accelerated rate, up 23% YTD, sufficient to sustain the company’s growth trajectory while buying back significant amounts of stock. The buybacks topped $1.3 billion in Q3 and $4.3 billion year-to-date, reducing the count by 5.4% at the end of the quarter. The balance sheet reflects the impacts of aggressive share buybacks, including reduced cash and equity, but remains healthy. The company is well-capitalized, has a growing free cash flow, and has low leverage with long-term debt of less than 1x equity.

Guidance and Analysts Trends Provide a Tailwind for Share Prices

The guidance provides strength for Fiserv’s stock price tailwind. The guidance was increased on the top and bottom line, the third increase this year, to levels outpacing the analysts' consensus and likely increased again due to mounting leverage. The company announced several wins with new and existing clients and product innovation that will drive growth over the next few years. 

The analysts like the trends in Fiserv’s results and are lifting their estimates for future results and the stock price. The 26 analysts tracked by MarketBeat show a high conviction in the Moderate Buy rating, with 85% of them rating at Buy. The price target lags the market but provides significant technical support, rising nearly 20% following the Q3 release due to revisions. The revisions suggest this stock will move to the high-end range of analysts' targets, a new all-time high near $245. 

Fiserv Insiders Sell Shares

Fiserv insiders are selling shares in 2024 but pose no threat to investors. The sales are consistent with activity related to share-based compensation and align with the trends. The insiders sell this stock regularly in small amounts and own less than 2% of shares, so they provide only a weak headwind for the stock price action. Institutions are a more significant force in this market, owning 90% of the shares and buying on balance in 2024. 

The price action in Fiserv shares is bullish. The market is rising strongly, supported by multiple tailwinds, including growth, cash flow growth, share repurchases, and sell-side interest, including those of analysts and institutions. The uptrend in share prices will likely continue with this in play, easily hitting the $244 target by mid-2025 and extending the rally to new highs as business growth and capital return continue over the long term.