Bank Of America Initiates Fiserv Bullish, Says First Data Deal Has Strategic Rationale

Fiserv Inc’s FISV all-stock merger with First Data has significant strategic rationale as it offers cross-selling opportunities, while also making sense financially, according to Bank of America Merrill Lynch.

The Finserv Analyst

BofA's Jason Kupferberg initiated coverage of Fiserv with a Buy rating and a price target of $128.

The Thesis

The initial five-year revenue and cost synergy targets of $500 million and $900 million, respectively, appear conservative in terms of both magnitude and timing, Kupferberg said in the initiation note.

He added that the synergy and accretion targets would probably be raised at the company’s March 2020 Analyst Day, which would be a catalyst for the stock.

During the third-quarter earnings call, Fiserv guided to organic revenue growth of at least 7% in 2020. While this target is ambitious, it does seem achievable, the analyst mentioned.

The merger with First Data “dramatically diversifies” Fiserv’s revenue mix “by vertically integrating a faster growing merchant acquiring business” to the company’s already robust portfolio of core banking solutions, Kupferberg noted. He expects the merger to “sustainably accelerate” Fiserv’s organic revenue growth.

Finserv Price Action

Shares of Fiserv were flat at the time of publishing Tuesday.