Saturday, August 25, 2018

FIS Prized For Its Leverage To Bank IT Investments

I was fairly lukewarm on FIS (FIS) back in May of this year, and the shares have since risen another 5% or so – keeping pace with the S&P 500 but largely sitting out the strong ongoing run in fintech names, as peers/comps like Jack Henry (JKHY), Worldpay (WP), Fiserv (FISV), and Total System Services (TSS) have shot higher as Wall Street seemingly can’t get enough of the fintech sector growth story.

As it concerns FIS, while I like the story of leveraging ongoing growth in bank IT investment, including a growing willingness to outsource as “keeping up with the Morgans” with internally-developed systems becomes prohibitively expensive, I just don’t see the growth here to support a substantially higher share price. Outsourcing among banks could perhaps inflect more strongly than I expect, or FIS could perhaps migrate a bit further down-market from its core Tier 1/Tier 2 bank focus, but this remains a stock where I understand the fundamental drivers but struggle to make more sense of the valuation and expectations.

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FIS Prized For Its Leverage To Bank IT Investments

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