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Why Fiserv Stock Has Tumbled 11% So Far This Week

By Rich Duprey – Oct 29, 2021 at 9:14AM

Key Points

  • The finch stock beat analyst earnings expectations on the top and bottom lines.
  • The loss of a key partner played an oversize role in the market's response.

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Customer concentration is a risk that investors need to consider.

What happened

As of yesterday's close, shares of Fiserv (FISV -0.69%) are down nearly 11% so far this week, according to data provided by S&P Global Market Intelligence. The provider of payments and financial services technology reported third-quarter earnings that beat analyst expectations, but included the announcement that it had lost a major customer that impacted North American processing volumes by 500 basis points in the quarter.

Fiserv's stock suffered its worst single-day loss since the start of the pandemic, losing 9% on the day. It was only surpassed by the 11% loss incurred on March 18, 2020.

Couple making an online digital payment

Image source: Getty Images.

So what

Business was actually quite good for the fintech stock, as expected. Revenue for the period rose nearly 10% to $4.16 billion, beating Wall Street's forecast of $4.12 billion, while earnings of $462 million soared 62% year over year. 

On a per-share basis, adjusted profits of $1.47 were up from the $1.20 per share Fiserv posted last year, and beat by $0.02 the earnings analysts were looking for.

Unfortunately, that didn't seem to matter to the market, which zeroed in instead on the loss of one of its joint-venture (JV) partners, which analysts believe is online payment processor Stripe. It's not that the partner was stolen away by another fintech payments competitor; rather, Fiserv CEO Frank Bisignano said, the client is taking its business in-house.

"It wasn't a competitive takeaway and it was part of their strategy," Bisignano told analysts, "and we are happy to support them with our processing capability to roll out JVs for the period of time that we're given." 

Ultimately, it's still a loss of business even if Fiserv says it doesn't affect the company economically, if it only just lowers the volume of business it will be doing.

Now what

The company tightened its outlook for the rest of the year, expecting internal revenue growth of 11% while improving its guidance for adjusted earnings per share to a range of $5.55 to $5.60, or an increase of 26% to 27% compared to last year.

That's still some heady growth, and with the stock down sharply this week and off 22% from its 52-week high, investors might want to take another look at the leader in payment and financial services tech.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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