Fiserv’s Stock Plummets Amid Analyst Skepticism
(Bloomberg) — The lone analyst rating Fiserv as a Sell has expressed relief at finally being able to share his thoughts. Dominic Ball, a 26-year-old analyst at Rothschild & Co. Redburn, has been waiting for months to write this article, especially after witnessing a significant downturn in the company’s stock.
Most on Wall Street were taken aback by the massive loss in fintech profits. Just this week, about 80% of analysts following Fiserv had recommended a Buy rating. However, Ball had flagged concerns as early as April.
This skepticism proved warranted when Fiserv’s shares plummeted by a staggering 44% on Wednesday, erasing approximately $30 billion in market value. The company revised its full-year profit outlook downward and admitted it could not meet earlier commitments to investors. The difficulties stemmed from its primary POS system, Clover, which drew criticism for imposing high fees on customers. This issue was a focal point in Ball’s detailed research, which included discussions with Clover users.
According to Ball, there was a striking gap between the reality faced by merchants and retailers and the perception held by investors. He noted the overwhelming responses from customers who felt relieved someone was sharing their frustrations.
“I received so many emails that I couldn’t respond to them all,” he mentioned.
Analysts are now racing to downgrade Fiserv following the recent fallout, with a consensus that a rapid turnaround is unlikely. Ball’s revelations emerged after he spent six months researching POS providers in 2023 to better understand competitor Toast.
Ball pointed out that Clover’s limitations arose from its distribution struggles and slower growth in market share. While it performed well among merchants earning $200,000 to $250,000 annually, they had already captured a significant portion of that market by year’s end.
Former CEO Frank Bisignano, who recently joined the Trump administration, had based many of his growth forecasts on Clover, which had previously been outperforming.
In contrast, Ball assigned a Buy rating to Toast back in February 2024, calling it a superior product to Clover. Since then, Toast’s shares have surged nearly 90%. In a follow-up interview with Bloomberg TV, Ball claimed that Toast represented the best stock option in the payments space.
“Toast stock is definitely undervalued,” he said, proudly asserting that “we love toast.” The company’s stock even saw a 5.8% rise in New York on Friday.
On the other hand, Fiserv has lost about 70% of its value since Ball’s warning on April 17. Investors were caught off guard by the company’s earnings drop and revenue shortfalls in its financial solutions division, which serves many banks and credit unions.
Ball suggested that management may have concentrated too much on Clover, negatively impacting other business areas, which might have suffered as a result. He also speculated that Fiserv might have “lost customers from its core banking product, affecting its overall performance.”
Ball, who graduated from the University of Exeter in 2021, initially worked in auditing before transitioning to fintech analysis. His call on Fiserv has garnered recognition from various audiences.
He reflected on the customers’ gratitude for his sell assessment, stating they were appreciative of the insight.
Reaffirming his sell position after the stock’s decline, Ball noted that Fiserv is unlikely to bounce back anytime soon. “At this stage, we do not consider Fiserv a viable investment,” he remarked in a note to clients.
