Why Shares of Fiserv Are Rising Today
Key Points
An activist investor has reportedly built a stake in the company, according to the Wall Street Journal, which cited anonymous sources.
Activists can push for changes that enhance shareholder value.
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Shares of the payments and bank technology company Fiserv (NASDAQ: FISV) traded nearly 6% higher, as of 1:17 p.m. ET. The Wall Street Journal reported earlier that activist investor Jana Partners has built a stake in the company and is lobbying for change that will lift the struggling stock.
Big turnaround ahead
The Wall Street Journal cited anonymous sources in its reporting, saying Jana supports the current CEO, Mike Lyons, who took the position last May. While Jana's position at Fiserv is unknown, the Journal reported that the investment manager believes the company could benefit from increased bank spending.
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Jana reportedly wants Fiserv to focus on its core banking franchise, which provides core processing technology that powers banks' daily operations. Jana also reportedly wants the company to conduct a strategic review and look to exit non-core assets.
Fiserv, a stock that historically performed very well, saw its stock get absolutely crushed last October, following a dismal earnings report that cut the stock by more than half. In this report, management cut Fiserv's prior guidance, setting it well below expectations.
The problem involved Fiserv's Clover point-of-sale payment processing business, which apparently had been charging excess fees to customers. The company is also being sued for allegedly misleading investors about Clover's growth.
Fiserv's core technology banking business has also seen revenue declines, stoking concerns about the company's efforts to modernize its technology while retaining market share.
Upside potential, but a long road ahead
Fiserv has historically been a great business, and there's an opportunity to return to its former glory. Technology is now a key part of banking, and Fiserv has strong relationships with financial institutions that could make it a key partner if it can offer the right solutions.
Right now, the company has lost the faith of shareholders, so it's going to be a show-me story. The stock trades at less than eight times forward earnings. I think it's worth a small starter position. Investors should then monitor the company's progress before buying more.
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Bram Berkowitz 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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