Fiserv (FI) stock dropped on Thursday after the company’s chief financial officer said that its point-of-sale system (POS) Clover will likely not see any growth in the current quarter.
Speaking at J.P. Morgan’s Global Technology, Media and Communications Conference in Boston, Fiserv CFO Robert Hau said that Clover’s growth will be “generally similar” in the second quarter as it was in Q1.
He noted that some of the growth the company saw in the first quarter had been due to Fiserv’s existing clients converting to the Clover gateway platform last year, creating a one-time bump.
"So we had a gateway that was non-Clover for clients that we converted over to the Clover Gateway,” according to a transcript from AlphaSense. “That doesn't repeat this year,.”
Shares of Fiserv plummeted 16.2% on Thursday. The stock has dropped 22.5% year to date.
Fiserv reported in its Q1 earnings that Clover volume grew 8%, compared to 14% growth in the fourth quarter.
However, Morningstar analyst Brett Horn noted that Clover has seen strong growth in recent years, which the firm sees as a “primary catalyst for growth within Fiserv's merchant acquiring operations.”
The Clover platform is designed for the hospitality, service, and retail sectors.
Horn added that if you exclude factors that Fiserv attributed to the drop in growth from one quarter to the next – including gateway conversions and an extra day in Q4 – “the decline in volume growth was much more modest.”
With today’s selloff of the of Fiserv shares, Morningstar sees the stock as now being in “undervalued territory.”
“The issues negatively affecting Clover's reported volume growth appear to be temporary,” Horn wrote. “Additionally, we think Clover continues to outperform Square, which suggests its competitive position is not weakening.”
Square, which is now knowns as Block (XYZ), pioneered the POS platform for small businesses. However, the company has now expanded into lending and financial services and has launched an open bitcoin mining system called Proto.
In addition to Fiserv, Block has been facing stiff competition in the POS space from Toast (TOST), which likely pushed it into expanding its busines offerings.
As for Fiserv, Horn noted that its revenue growth remained strong in the first quarter, with a 27% increase year over year (YoY). “We think opportunities to cross-sell additional services will support top-line growth even if [Clover] volume growth slows,” he added.
Morningstar maintains a $198 fair value price target for Fiserv. The company’s stock was priced at $159.13 at the close of trading on Thursday.
Fiserv last week named Michael Lyons as its new chief executive officer. He was formerly president of PNC Banking. Frank Bisignano, Fiserv’s former CEO, now works for the Trump Administrationn as commissioner of the Social Security Administration.
Your email address will not be published. Required fields are markedmarked