FISV Stock Soars on Changing Financial Landscape
Today’s stock represents another of our favorite strategies for picking growth stocks. By riding the prevailing technology trend and picking up companies well-established in their space, investors can earn superlative returns. With the rise of the digital age, the financial sector has also been undergoing rapid changes. Players in this space are trying to capitalize on emerging opportunities, but not all can be successful. By picking stocks carefully, investors stand to reap huge gains.
The case in point being Fiserv Inc (NASDAQ:FISV), which leads in the financial services technology solutions segment and helps more than 12,000 clients deliver digital world experiences around the globe. With the landscape of finance changing rapidly as Internet and mobile penetration increases, Fiserv offers solutions that enable today’s consumers to move and manage money with ease, speed, and convenience.
Its clients include banks, thrifts, credit unions, investment management firms, leasing and finance companies, retailers, merchants, and more. Fiserv provides them with electronic payments processing products and services; card-based transaction processing and network services; and Internet and mobile banking systems. Most of these services are necessary for Fiserv’s clients to operate their businesses and are, therefore, non-discretionary in nature, which provides stability to the business and a strong foundation to Fiserv stock.
It is believed that the financial services sector has been hit hard following a spate of negative developments. However, such disruptions turn out to be good for financial services technology companies like Fiserv because the services they provide help those financial sector players lower their cost of operations, which has become the single most important objective in these troubled times.
For example, financial sector players are resorting to technology to lower costs and improve their customer experience. Therefore, having a digital and mobile strategy has become a must for these players.
Let us consider just one business segment of the company. According to a research report by Allied Market Research, the online banking market size is expected to touch almost $30.0 billion in 2023 and post a compound annual growth rate (CAGR) of 22.6% from 2017 to 2023. Digital Banking comprises of various types of online/Internet transactions as well as new technologies used to deliver improved customer services. (Source: “Online Banking Market – Global Opportunity Analysis and Industry Forecast, 2017-2023,” Allied Market Research, July 2017.)
With its digital consumer and business banking products like “Mobiliti,” Fiserv is able to provide a variety of mobile banking and payments services to its clients and their customers, including balance inquiry, transaction history, bill payment, person-to-person payments, and transfers through their smartphones and tablets. The company has been making acquisitions to strengthen its position in this area, which would translate to higher moves for FISV stock.
Just last week, Fiserv announced that Commercial Bank of Ceylon PLC (ComBank) of Sri Lanka will replace its current digital platform with an integrated digital banking solution from the company to speed up the delivery of new capabilities that could meet the needs of its retail and corporate customers. The implementation of “DigitalAccess”—Fiserv’s readily deployable solution to provide a rich digital banking experience across smartphones, tablets, and desktops—makes ComBank the first bank in its market to offer fully integrated digital banking capabilities.
Fiserv has been growing its business by developing highly specialized services and product enhancements. It has been extending its capabilities through innovation, adding new clients and acquiring businesses that complement theirs. By creating new opportunities for growth, the company is going on the right path and paving the way for higher Fiserv stock.
In 2016, the company had $5.5 billion in total revenue and $1.4 billion in operating income. Last month, the company reported third-quarter results. GAAP earnings per share were $1.08, an increase of 13% year-over-year. (Source: “Fiserv Reports Third Quarter 2017 Results,” Fiserv, October 31, 2017.)
In September, the company acquired Monitise plc, which provides digital solutions to enable innovative digital banking experiences for leading financial institutions around the world.
Given the optimism around future growth, FISV stock has gained more than 200% in the last five years and about 25% over the past year. The following chart shows this astounding rise.
Chart courtesy of StockCharts.com
The quest for higher profits shall keep banks and other financial sector players looking for ways to lower their costs. This would keep the demand for Fiserv solutions high and push Fiserv stock higher. As customer expectations from their banks and other financial institutions keep increasing, such firms will have to adopt digital and mobile channels to keep them happy and loyal.
For investors looking for growth, this is an exciting space to be in. With the rise of digital and mobile banking, there is a huge market opportunity for players like Fiserv who can stay ahead in the game with the right strategy and execution. If this can be achieved, FISV stock is likely to touch new record highs.