By Emily Barry
Fiserv shares snap a six-session losing streak
Shares of Fiserv Inc. and Fidelity National Information Services Inc. rebounded on Tuesday as concerns about their exposure to regional banks appeared to ease.
Fiserv shares ( FISV ) ended the session up 6%, snapping a six-session losing streak. The stock had lost almost 7% in Monday’s session alone.
Shares in FIS ( FIS ) had fallen in each of the previous three sessions, including when they posted a nearly 13% drop on Monday, but they rallied on Tuesday to close up 7%.
The two companies deal with merchant processing and also supply infrastructure to banks. Analysts recently weighed in to say the sale for the duo seemed like an overreaction given the companies’ exposure.
Mizuho’s Dan Dolev weighed in on Fiserv and said in a note Monday afternoon that he saw “minimal” exposure to Silicon Valley Bank for the company.
“Also, regional banks are not a big source of revenue and tend to be more license versus recurring,” he noted.
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Barclays analyst Ramsey El-Assal had a similar view.
“Silicon Valley Bank and Signature Bank exposure is likely immaterial” to Fiserv, he wrote on Tuesday. “Although Silicon Valley Bank is a core client of FISV, we believe its revenue contribution is quite small. Our further prediction is that the failure of Silicon Valley Bank will have no impact on FISV’s current growth prospects.”
He said Fiserv’s “large, diversified customer base provides protection.”
El-Assal also saw only “very modest” potential consequences for the FIS.
“FIS exposure to stressed regional banks appears minimal, and contract structures provide an offset,” El-Assal wrote. “First, we note that while the now-defunct Signature Bank is a core processing customer, it is our belief that FIS will likely continue to receive payments based on the number of core accounts (rather than based on balances), despite the bank going into receivership (this will indeed be true of any bank that fails).”
Bernstein’s Harshita Rawat wrote that between the two, “FIS has far greater exposure to regional banks” as Fiserv’s “core [customers] tend to be smaller banks, community banks and credit unions” while “FIS, on the other hand, operates more in the larger (regional) banking space.”
She added that “although the banking situation is a bit uncertain at this point and FIS is exposed to regional banks,” FIS trades at a nine-times multiple of price to earnings, and a sum-of-the-parts value “shows upside.” She and her team are “looking for hints of numbers stabilization and management execution before we consider getting more constructive.”
-Emily Barry
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03-15-23 0808ET
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