FIS: A Turnaround, or Just Polished Brass?

The runes were not looking favorable for Fidelity National Information Services (FIS 1.42%) this past Tuesday. A tumble of 4% – a significant drop even in the notoriously fickle markets – sent ripples through the Guild of Alchemists and Venture Capitalists¹. One might have thought a bargain was to be had, a chance to acquire a piece of the machinery that makes the world’s coin change hands. But, as with most things involving large sums of money and even larger egos, the situation is… nuanced.

For years, FIS has been trending downwards, a slow leak of value that has seen a three-year annualized return of negative 5% and a five-year plunge of 14%. It’s a bit like watching a perfectly good golem slowly crumble into dust, isn’t it?² The source of this malaise? A rather ambitious acquisition of Worldpay back in 2019. Think of it as trying to graft a particularly thorny rose bush onto a sturdy oak tree. It looked good on the ledger, but the resulting hybrid was… unhappy.

Fidelity, realizing its mistake (a rare occurrence amongst those who manage vast fortunes), attempted to shed some of the Worldpay burden. In 2023, they offloaded 55% to a private equity firm for a mere $11.7 billion. A loss, shall we say, that lingered in the accounts like a particularly stubborn ghost. Earnings only began to reappear in the second quarter of 2024, but the valuation remained… enthusiastic. A price-to-earnings ratio nearing 200? That’s less ‘growth stock’ and more ‘optimistic delusion.’

As we approach 2026, the question hangs in the air: is FIS a prospect for the discerning investor, or should one simply look away and pretend it isn’t there?

Some Flickers of Hope for Fidelity National

There are, admittedly, glimmers of light. Last quarter saw earnings climb 8%, revenue inch up 6%, and – most importantly – free cash flow surge a rather impressive 101% to around $800 million. Cash flow, you see, is the lifeblood of any enterprise. Without it, even the most magnificent tower of financial wizardry will eventually collapse. The lack of it in recent years has hampered FIS’s ability to invest in new technologies, leaving it vulnerable to upstart competitors like Stripe, who seem to be built on pure audacity and a frighteningly effective marketing campaign.

The other notable development is the sale of the remaining Worldpay stake to Global Payments for around $24 billion. In exchange, FIS acquired Global Payments’ issuer solutions business for approximately $13 billion. A swap, if you will, like trading a slightly disgruntled dragon for a moderately useful but impeccably polite unicorn. This move allows FIS to exit the merchant acquiring space – serving those who take the money – and focus on its core business of serving banks – those who have the money. A sensible move, one might think, though logic rarely prevails in the higher circles of finance.

Has Fidelity Finally Turned the Corner?

Fidelity has raised its revenue guidance for fiscal 2025, projecting growth of 5.4% to 5.7% and reaffirmed its adjusted earnings-per-share growth forecast of 10% to 11%. It’s also increased its target for adjusted free-cash-flow conversion to greater than 85%, up from 82% to 85%. This suggests increased efficiency, or, at least, a slightly more competent accounting department. The critical question, of course, is: has FIS truly turned the corner, or is this merely a temporary respite before another plunge into the abyss?

Based on forward earnings projections, the P/E ratio is expected to plummet to around 10, which is, frankly, surprisingly reasonable. Most analysts consider it a buy, with a price target of $81 per share, suggesting a potential 34% upside over the next 12 months. But, as any seasoned investor knows, analysts are often wrong. Terribly, wonderfully wrong.

I’m cautiously optimistic. If you already own FIS, I’d suggest holding on for now. It appears to be trending in the right direction, albeit slowly. However, I’d wait for more visibility on the issuer solutions deal this month and the fourth-quarter earnings report on February 10th before making any rash decisions. After all, in the world of finance, patience is often the most valuable commodity. And a healthy dose of skepticism.

The Guild, as it’s known, is a notoriously secretive organization. Rumors abound of arcane rituals involving spreadsheets and the sacrifice of perfectly good venture capital.

A golem, for the uninitiated, is an artificial being created from inanimate matter. It’s surprisingly common in the upper echelons of finance, though they rarely admit it.

2026-01-23 19:33

Some Flickers of Hope for Fidelity National

Has Fidelity Finally Turned the Corner?

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