Seeking Alpha Quant warned about Fiserv months before crash

With too many headlines to digest in markets this week, a notable fintech blowup flew under the radar. Fiserv (FI), the company behind the Clover point-of-sale terminals seen in many stores, crashed 44% after its earnings on Wednesday, and slid another 7.6% yesterday to lose nearly half of its value across only two sessions. This shocked the nearly three dozen analysts on Wall Street (except for lone bear Dominic Ball), triggering a flurry of immediate downgrades and rating reassessments.

What happened? The company slashed its guidance after third-quarter results severely missed expectations, while fears over management took hold of investors. Prior CEO Frank Bisignano left in May to head up the Social Security Administration under the Trump administration (and later the IRS too). However, his successor, Mike Lyons, just called prior sales forecasts "objectively difficult to achieve," setting up dueling narratives of who is to blame for the underperformance.

"One of the most hated companies in finance," writes SA premium subscriber Kansas King. "They have the worst customer service given the services they provide and they charge an insane amount for what they offer. Fiserv can be a great long-term company, but they have to fix some fundamental issues. They also have to somehow navigate the massive ship through potential crypto/stablecoin disruption." Other concerns center around competitors and cheaper alternatives, such as Toast (TOST) or Block's (XYZ) Square systems.

Looking to reassure investors, Fiserv (FI) has outlined a reset starting with leadership at the top. There will be new co-presidents to drive "execution, collaboration and accountability," as well as a new CFO to "add domain expertise and experience." Governance will also be strengthened with three new directors, including new audit and independent chairs. "The action plan, in my view, just worsens the situation," said SA analyst Julia Ostian, who notes total long-term debt of $25.6B, which is now about the size of the fintech's current market cap.

Red flags: Seeking Alpha's Quant ratings first flashed Sell signals on Fiserv (FI) in early August, before permanently setting a Sell rating on the stock later that month. At the time, the stock was still trading near $140/share, which was two months before the implosion this week that saw shares crater to $65. Discover more about Seeking Alpha Quant ratings performance here, as well as the PRO Quant Portfolio.