Fiserv shares plunge after $30bn wipeout

Shares in Fiserv plummeted nearly 42% on Wednesday and were set for a record single-day drop after the payments software company reported results below estimates and cut its growth forecast for the second consecutive quarter, with analysts calling the earnings “shockingly bad”.

The disappointing earnings highlight growing pressure on the fintech’s core payments and merchant business, which has struggled to maintain momentum amid fierce competition and a slowdown in consumer spending.

“To be frank, we’re struggling to recall a miss and guide down to this degree in any of the sub-sectors we’ve covered during our time on the street,” said Truist analyst Matthew Coad.

Fiserv also announced an overhaul of its senior leadership, appointing a new finance chief and two co-presidents.

Management changes of this scale often point to internal challenges or a shift in strategy, deepening investor concerns about the company’s near-term outlook.

If current losses hold, they will erase roughly $29bn (R502bn) from the company’s market cap, according to Reuters’ calculation. “We can no longer recommend Fiserv, given what we consider a shocking third-quarter revenue and EPS miss, and abrupt management transition,” analysts at William Blair said, adding it was “impossible to sugarcoat” the results.

“This performance suggests to us that management took its eye off the ball at some point earlier this year.”

The broader economy faces multiple headwinds, with leading companies reporting slower consumer spending, particularly among lower-income households, as inflation and high interest rates weigh on budgets.

Fiserv is primarily a business-to-business payments firm, and provides critical back-end infrastructure for banks and financial institutions, underpinning key payment and merchant services that drive daily operations.

At least two brokerages downgraded Fiserv’s stock rating after the results. “We need to change the way we forecast and communicate about our business and engage with analysts and investors,” CEO Mike Lyons, who took the helm at Fiserv only months ago, said in a call with analysts.

“Going forward, we will more clearly explain our growth drivers, enhance the rigour in our forecasting, which will allow us to provide high conviction guidance.”

Lyons said the forecast reset was taken after a “rigorous” analysis during the third quarter, as the firm shifts its strategic focus away from short-term revenue initiatives, while experiencing a slowdown in growth in its Argentina business.

Fiserv now expects annual revenue growth of 3.5% to 4%, compared with its prior forecast of 10%. Annual adjusted profit per share is now expected between $8.50 and $8.60, down from its earlier forecast of $10.15 to $10.30.

“Our current performance is not where we want it to be, nor where our stakeholders expect it to be,” Lyons said in a statement.