Fidelity National Information Services: A Top Undervalued Tech Stock to Buy According to Hedge Funds

Fidelity National Information Services (FIS) has emerged as one of the top undervalued tech stocks to buy according to hedge funds, thanks to its strong financial performance, strategic transformation, and positive analyst sentiment. This article will delve into the key factors that make FIS an attractive investment opportunity, supported by data and expert insights.

Strong Financial Performance

FIS has consistently delivered robust financial results, with a 3% increase in revenue on a GAAP basis and a 4% increase on an adjusted basis in the third quarter of 2024, reaching approximately $2.6 billion. The company's adjusted EPS grew by 49% to $1.40 per diluted share compared to the prior-year period. These impressive financial metrics indicate FIS's ability to generate value for shareholders and maintain a strong market position.



Raised Full-Year Guidance

FIS raised its full-year outlook for both revenue and adjusted EPS, reflecting the company's confidence in its financial position and future growth prospects. The adjusted EPS outlook was increased to $5.15-$5.20, reflecting 11 months of EMI contribution for the full year. This positive outlook suggests that FIS is well-positioned to continue its growth trajectory.

Healthy Adjusted EBITDA Margins

FIS maintains healthy adjusted EBITDA margins in its Banking Solutions (45.2%) and Capital Market Solutions (49.9%) segments. These margins indicate successful market positioning and operational efficiency, allowing FIS to generate significant value for shareholders while maintaining a strong competitive edge.

Capital Allocation

FIS is committed to returning capital to shareholders, with a goal to repurchase approximately $4.0 billion of shares in 2024. The company has already repurchased $3.0 billion of shares year-to-date in 2024, demonstrating its strong confidence in its financial position and future growth prospects.

Strategic Pivot: The Worldpay Sale

The completion of the Worldpay Sale marks a strategic pivot that streamlines FIS's operations while maintaining upside through a 45% ownership stake. This move allows FIS to focus on its core competencies and unlock financial technology for its clients, driving operational efficiency and market positioning.

Analyst Consensus: Buy

The consensus among 21 analysts with 12-month price forecasts for FIS stock is a target of $92.19, which represents an 18.13% increase from the current stock price of $78.04. The average target predicts an increase of 18.13% from the current stock price, indicating that analysts believe this stock is likely to outperform the market over the next twelve months.

Conclusion

Fidelity National Information Services (FIS) is a top undervalued tech stock to buy according to hedge funds, thanks to its strong financial performance, strategic transformation, and positive analyst sentiment. With a compelling combination of value and long-term growth potential, FIS offers an attractive investment opportunity for those seeking to capitalize on the tech sector's growth prospects. As the company continues to execute on its strategic vision and deliver strong financial results, FIS remains an appealing choice for investors looking to gain exposure to the tech sector's growth potential.