What happened

Shares of payment processor Fiserv (NASDAQ:FISV) plunged on Wednesday, following news of the loss of a large customer. The stock was down 13.1% at the lows of the day, but as of 2:14 p.m. EDT, it was bouncing a bit and is now down about 11%. It was the stock's worst single-day loss since March 2020, when the COVID-19 pandemic was breaking out across the world.

But is the sell-off overdone, and could this bad day be an opportunity for longer-term investors?

Person holds head in distress while looking at laptop.

Image source: Getty Images.

What happened

At first glance, the sell-off may seem unwarranted. After all, Fiserv's third-quarter numbers of 10% non-GAAP (adjusted) revenue growth and 23% adjusted earnings-per-share growth were solid, beating analyst expectations. The company even increased the low end of its full-year guidance range, from $5.50-$5.60 per share to $5.55-$5.60 per share.

However, in the earnings call, management also mentioned the "loss of a large processing client through one of our JVs," which impacted North American processing volumes by 500 basis points in the quarter. The loss of a large client is never good, especially as concerns mount over high-growth fintechs disrupting the traditional payments processing space. Fiserv is one of the largest traditional players, after acquiring rival First Data back in 2019.

Now what

While the loss of that much processing volume is significant, there may be a few silver linings here that could make the sell-off a buying opportunity. First, CEO Frank Bisignano emphasized this client, a partner in one of their joint ventures, decided to take certain processing functions in-house. So, the loss wasn't from the competition stealing the client away. Many sell side analysts think the partner was private unicorn Stripe, which operates similar payments functions for its clients.

Second, that client, while representing a lot of payment volume, doesn't appear to be yielding the company that much revenue. After all, that loss is already in Fiserv's numbers and guidance, and the company did beat expectations while also reiterating its full-year guidance range. So, the loss may be more significant for concerns over fintech disruption than it is for actual future revenue and profits. 

The stock now trades at 17 times next year's earnings estimates, which isn't very expensive. So, bargain hunters may wish to give this beaten-down payments giant a look this week.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.