Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

A leading provider of banking and payments technology, Fidelity National Information Services Inc. (FIS - Analyst Report) was recently selected by Woolworths Ltd. to provide prepaid card processing services including card acquisition and transaction processing.

Woolworths is a renowned merchant operating in various sectors including supermarkets, petrol, liquor, general merchandise, hardware, consumer electronics, hotels and pubs in Australia and New Zealand.

Woolworths, through its financial services division offers credit cards, ATMs, gift cards and general-purpose prepaid cards. Fidelity currently processes more than 250,000 prepaid cards for Woolworths.

We believe the new partnership will allow Fidelity to penetrate further in the growing markets of Australia and New Zealand. Fidelity currently supports prepaid cards in 34 countries and 16 currencies, with annual transactions of approximately 775 million.

Global expansion has been one of the key growth strategies for Fidelity in the recent years. Fidelity remains focused on developing its footprint in the emerging economies of the Asia-Pacific and thus added a number of clients in China and Singapore in 2010.

In Australia, the company expanded its product portfolio, which currently includes core-processing services. ANZ, one of Australia's largest banking groups, is in the process of consolidating its New Zealand subsidiaries to Fidelity’s core platform.

Fidelity is providing card processing services in the region since 2001 and it is noteworthy that Fidelity is currently the leading third-party card processor in Australia.

Besides Asia-Pacific, Fidelity continues to gain significant market share in the growing Latin American economies, particularly Brazil. Fidelity is processing the newly launched ELO branded credit cards issued by Banco Bradesco, one of Brazil’s largest private commercial banks.

Fidelity will also process ELO branded prepaid cards, which are scheduled to launch in June, 2011, reflecting further revenue growth potential going forward.

These growth initiatives in the overseas market positively impacted International revenue in the first quarter of 2011 ended March 31. International revenue increased 48.6% year over year to $268.0 million in the first quarter (27.5% organic growth).

We believe Fidelity’s increasing international exposure particularly in the emerging economies will consistently drive top-line growth over the long term.

Recommendation

We maintain our Neutral rating on a long-term basis (for the next 6 to 12 months), primarily due to increasing debt and intense competition from Fiserv Inc. (FISV - Analyst Report), International Business Machines Corp. (IBM - Analyst Report), Accenture Plc (ACN - Analyst Report), Alliance Data Systems (ADS - Analyst Report), MasterCard Incorporated (MA - Analyst Report) and Visa Inc. (V - Analyst Report).

Increasing consolidation in the banking sector, a challenging environment for the Payments Solutions business and an uncertain regulatory environment are the primary business headwinds in our view.

However, Fidelity’s commanding position in the financial services market, increasing international exposure, recurring revenue model, cost synergies from acquisitions and a loyal customer base will drive growth over the long term.

Currently, Fidelity has a Zacks #3 Rank, which implies a Hold rating in the short term (1-3 months).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%