Fiserv (NASDAQ: FISV) Lines Up A Killer 2021 Plan

It might have taken them a bit longer than expected to undo the damage done back in March but shares of fintech Fiserv (NASDAQ: FISV) are closing the gap fast. With only a few trading days left in 2020 they look good value to close out the year higher than where they started and at all time highs.

Having traded sideways for much of the summer and fall, they’ve now rallied more than 20% in the past month, a move underpinned by their Q3 earnings and an improving long term outlook. While the former didn’t wow investors as much as expected in late October, key benchmarks like EPS still came in higher than the consensus. Also of note was the internal revenue growth rate, which grew by 3% versus the -8% analysts were expecting, helping to make management confident enough to raise full year 2020 guidance.

With the subsequent rally giving investors plenty to be happy about, management were out with fresh fuel for the bulls earlier this week at an investors conference. The affirmed 2020 guidance with EPS expected to grow 11% while also giving investors a sneak preview of what they’re anticipating for 2021. Specifically they’re looking at EPS to grow upwards of 25%, helped by the continued dwindling of the impact of COVID-19. CEO Frank Bisignano told investors "we have broadened the lower end of our internal revenue growth range to reflect the potential for economic volatility from COVID-19 in early 2021. Fiserv remains very well positioned for continuing strong financial performance, and value creation for clients and shareholders".

30% Upside In Shares

In light of these bullish comments, Wall Street was only too happy to readjust their opinions of the Wisconsin headquartered company. Guggenheim were out with an increase in their price target, moving it up to $147 which suggests upside of more than 30% from Thursday’s closing price. Management’s comments did the trick here as the sell-side firm pointed out the "robust" outlook was "above our expectations, and we expect this will be well-received by investors."

Their friends in Raymond James also reiterated their Outperform rating, and lifted the price target on Fiserv shares to $132. They were also impressed with the forward guidance and can see "meaningful upside to the stock" if they can go on to beat that in the coming quarters. David Koning at Baird sees shares hitting $150 if the current momentum continues, with them looking likely to return to trading at a 30% premium to the S&P 500 index’s price-to-earnings ratio, versus the 5% discount they’re currently at.

Diamond In The Rough

Needless to say, hitting any of these price targets would mean shares had not only recovered the ground lost due to COVID but powered on to fresh all time highs. With Wall Street's view having changed so much for the better so recently, there’s a ton of potential for those of us still on the sidelines to get involved. The worst of the pandemic is behind us but Fiserv is only starting to hit its post-pandemic stride now, meaning there’s a big catch-up play on the cards for the rest of the year and 2021.

To that end, management is taking advantage of the recent run to launch a secondary offering that will boost their cash balance considerably. They’re also planning to buy back upwards of 60 million shares themselves, which will provide a solid bid in the stock price over the coming weeks. With shares cooling a bit since the news of the offering, it feels like a perfect opportunity to take advantage of a dip in a stock that looks ready to have a stellar 2021.