Pernas Research
Founder of Pernas Research, Fundamental Equity Research, USAF Background
Fiserv's problems look deeper than they first appeared, with more cockroaches likely in the kitchen. Its bank core processing revenue, which should be sticky, declined meaningfully. The business is operationally salvageable, but it increasingly looks like a culture issue, and fixing culture is hard. x.com x.com x.comÂ
Fiserv will likely stagnate for years because it cannot grow its way out of rising debt. It generates about $4B of free cash flow but has raised long-term debt to $28B to sustain aggressive buybacks, while growth was barely above inflation last year and totaled -0.5% over the past three quarters. A new CEO and new projects mean it is not going to zero, but it is far less attractive than @KrisPatel99's case for it as a deleveraging compounder. x.comÂ
Jack Henry is a better payments-adjacent pick than turnaround hopefuls PayPal, Fiserv and Global Payments. Earnings were perfectly fine, and it has a clean balance sheet, stable revenue tied to seven-year bank and credit union contracts, no direct consumer exposure and little retail attention. Its AI work with Anthropic is mainly as a customer, but COBOL modernization is a major need in banking. x.com x.comÂ
dLocal sits in payment processing, a sector that 30 years of data show to be dead because margins are low. Fintech is just software, without the asset leverage that banks have. dLocal fell about 11% after EPS of $0.14 missed the $0.15 estimate, per TrendSpider. x.com x.com x.comÂ
Shift4 Payments has too many red flags to own, with Jared Isaacman's departure the final straw, and there are many better opportunities elsewhere. The company did too many acquisitions too quickly; Global Blue looks like a mistake for now, though the deal can still work if Shift4 upsells and cross-sells its 300,000+ merchants. x.com x.comÂ
Shift4 is too cheap at these levels, essentially a private-equity-style vehicle in public markets that is hard to appreciate but runs a good playbook; Jared Isaacman is not selling out down here. Its Global Blue acquisition was poorly timed as US-Iran tensions crush international travel, Fiserv's turmoil hit payments, and AI angst weighs on software. Public investors can also choose easier-to-model stories with cleaner KPIs and capital structures. x.comÂ
Salesforce's $25 billion accelerated buyback leans on debt in a way that risks leveraging its future, as happened at Fiserv. Fiserv cut its share count 21.5% with debt-funded buybacks averaging $167 a share, and now trades under $60 as growth fell. Salesforce can afford this round with $14 billion of free cash flow, but growth is slowing to single digits, AI isn't yet transforming its ecosystem, and its goodwill-heavy book limits deals. The risk is that multiples compress and it doubles down. … Show more
Shift4 Payments may look cheap, but payment processing is a margin race to the bottom and a tough business. Companies with much stronger moats are a better use of capital, since paying fair value for a great business beats buying an OK business cheaply. @PronkDaniel notes it is growing strongly at 6.5 times estimated free cash flow while conceding its moat is questionable. x.comÂ