Issue #35: A fintech giant hiding behind the scenes and a new player shaking up the fitness industry

Steve McLaughlin might know fintech better than anyone on the planet. In 2001, in the depths of a recession, McLauglin left Goldman Sachs to form Financial Technology Partners, using the term fintech before it existed.

Today FT Partners remains the only investment bank exclusively focused on the fintech industry.

FT Partners has been part of some of the largest transactions in the fintech space, including M&A, Capital Raises, SPACs, and IPOs.

So what does McLaughlin think of the industry today?

“Still pretty slow, still pretty dysfunctional in so many ways. We’re still only in the second inning of this whole space emerging… You are going to see just another big wave of innovation.”

For perspective, this is an industry that will handle $6.68 trillion in transactions in 2021 – and it’s still in the second inning.

Let's get into this week’s report.

  • The invisible fintech giant that everyone uses and nobody knows.
  • A newly-public fitness industry disruptor formed by the merger of several established private companies.


$108.62 – Share price at time of writing



  • Fiserv is one of the world’s largest providers of payment and financial services technology.  
  • Fiserv builds the backbone of the digital economy. The customers are banks, credit unions, other financial institutions, and merchants.
  • Fiserv has almost 10,000 financial institution clients, 6 million merchant locations, and 1.4 billion global accounts.
  • Revenue growth reached 17% in Q2 2021, driven mainly by rapid growth in Fiserv’s Clover cloud-based point-of-sale system.

What they do:

Fiserv provides the backbone technology and services that support the entire financial services and payments ecosystem. Fiserv operates in over 100 countries and processes over 12,000 transactions per second.

Fiserv offers a wide variety of products and services, which the Company groups into three classifications.

  1. Merchant Acceptance services, including the Carat payment services solution for large businesses and the Clover cloud-based point-of-sale system for small and mid-sized businesses.
  2. The fintech division provides account processing, clearing, check clearing, account inquiry, and other services to banks and financial institutions.
  3. Payments services include payment processing, security and fraud protection, ATM management, electronic payments, credit processing, prepaid solutions, and other services.

Fiserv’s Merchant Acceptance business is the largest in the US, handling 40% of all in-person processes through joint ventures with Bank of America, Citibank, Wells Fargo, and PNC. This segment is also established outside the US:

  • 15% market share in India.
  • 50% market share in Argentina.
  • 30% of payment routing in Brazil.

Fiserv acquired First Data in 2019, acquiring the Clover brand (a point of sale system) in the process. First Data also provides debit acceptance for nearly 2 million retail, point of sale, ATM, and online outlets, handling a third of all US debit cards.

Fiserv’s Carat platform is used by Microsoft, Delta, Verizon, Disney, and many others. Fiserv is the underlying processor for Paypal, Stripe, Braintree, and others.

Fiserv is part of the S&P 500 and the Fortune 500, and has been one of Fortune’s “World’s Most Admired Companies” for 8 years in a row.

In Q2 2021 Fiserv reported revenue growth of 18%, led by 41% growth in the Merchant Acceptance segment. The Company raised 2021 guidance and now expects 10%-12% year-over-year revenue growth and 24% to 27% earnings growth for the full year.

What we learned from social media discussion:

Fiserv is almost invisible on social media. The Company is so far under the radar that it is almost underground, generating a total of 12 social media mentions in the last 3 months.

Not surprisingly, over 90% of the $FISV float is owned by institutions.

So we have a Fortune 500 company, a dominant player in a fast-growing business, with over $15 billion in annual sales and impressive revenue growth. It’s solidly profitable and earnings are rising – and investors have essentially never heard of it.

Part of that is simply the nature of Fiserv’s business. While almost every American has used Fiserv’s services, almost none of those services are branded in any way recognizable to the consumer. They are a household necessity without being a household word.

That relative invisibility has produced an unusual combination of growth and value.

???? Signal: Activist hedge fund ValueAct purchased 5.3 million $FISV shares in Q2 2021. ValueAct believes that the Clover point-of-sale system alone is worth $30 to $45 billion and could be worth $185 billion by 2024.

Why Fiserv could be valuable:

The global payment processing solutions market is expected to grow at a CAGR of 14.5% through 2027.

While Fiserv is not a branded payment processing company, it provides the backbone services that virtually all payment processing companies use.

While Fiserv faces direct competition in all of its various businesses, no competitor offers a similar range and reach of services. The Company is the dominant player in its business.

Fiserv’s products and services are “sticky”: once an institution has a relationship with one provider it’s very difficult to move to another one. This makes it difficult for an emerging competitor to challenge Fiserv’s dominance.

Fiserv’s Clover cloud-based point-of-sale system is emerging as the leading competitor in its space. It was introduced after Square, its leading competitor but now handles twice as many transactions and is growing rapidly.

Clover alone could be valued at up to $185 billion by 2024, more than double the market cap of Fiserv today.

New major investor ValueAct Capital Management has a reputation for supporting the transformation of dominant companies. ValueAct management states, according to Bloomberg:

“At this point in the cycle, we believe there is more money to be made investing behind incumbents transforming themselves than there is betting on disruptors. Fiserv checks all our boxes as a digital transformation candidate.”

Purely on a fundamental basis Fiserv offers both an impressive growth rate and solid value. The forward P/E ratio is 16.63, PEG is only 1.1, and the company trades at 4.66 times TTM sales. Given the Company’s growth rate, it can be considered undervalued at its current price.

As a valuation comparison, Square, a more visible fintech firm, currently has a market cap of $115 billion. That’s $44 billion higher than Fiserv. Fiserv has similar revenues, a more diverse business, a higher profit margin, and lower P/E and PEG ratios.

Fiserv’s ROE and margin are currently at historic lows due to costs associated with the First Data merger and integration. This may be deterring some investors. That is a temporary situation, and the merger, which brought the fast-growing Clover system into the Fiserv product mix, appears to have been a solid business move.

Fiserv is consistently profitable and has beaten analyst earnings estimates for four consecutive quarters.

Since 2018 Fiserv revenue has grown at a CAGR of 41%, including projected 2021 revenues. That’s an extraordinary growth rate for a dominant established player.

Fiserv has an extremely strong global business and stands to benefit from the rapid adoption of remote shopping and cashless payments in developing economies.

23 analysts currently cover Fiserv. The consensus rating is “Buy”, with an average price target of $142. That’s 30% above the current price.

What the risks are:

Fiserv faces competitors in all of its businesses. In many cases, those competitors are entirely focused on the single niche in which they compete with Fiserv. Fiserv will have to maintain its competitive position in all of these businesses simultaneously.

Payment processing and money transfer businesses face heavy regulation. Additional regulations could increase administrative requirements or make it more difficult for Fiserv to do business.

Fiserv is part of a global financial services ecosystem, in which each part is to some extent dependent on other parts. Any large-scale financial disturbance in a major market could disrupt this ecosystem and reduce the flow of money and information that sustains Fiserv.

Fiserv spent a substantial amount of money and took on debt to close the FirstData merger. If they fail to integrate the merged company effectively this could be an obstacle to growth.

Bottom line: Fiserv is a great example of a business that’s simply going about its business outside the world of hype. Growth is strong and the Company is actively pursuing new opportunities.

The Beachbody Company, Inc. ($BODY)

$7.02 – Share price at time of writing



  • The Beachbody Company is a combination of 4 established fitness brands: Beachbody, Openfit, Ladder, and Myx.
  • Beachbody acquired Openfit and Ladder in 2020 and the combined company joined Myx to go public through a SPAC, commencing trading on July 1, 2021.
  • $BODY has multiple revenue streams: nutritional supplements, streaming fitness content, and the Myx stationary bike and connected fitness system.
  • Beachbody’s first publicly traded quarter saw dramatic increases in revenue, subscriptions, total streams, active users, and other metrics.

What they do:

The Beachbody Company is a leading contender in the at-home fitness market, providing a range of fitness products and services.

The Beachbody Company was formed through a series of strategic acquisitions and mergers.

  • In Dec. 2020 fitness app operator Openfit acquired Ladder, a nutritional supplements firm founded by Arnold Schwarzenegger and LeBron James.
  • Beachbody LLC, which has provided fitness and nutrition products since 1998, subsequently acquired Openfit.
  • Beachbody and Myx, which provides a connected fitness program centered on the MYX and MYX Plus stationary bikes, merged with a SPAC, with the combined entity going public on July 1, 2021.

The Beachbody Company combines fitness, nutrition, and peer support, offering expert-led workouts, nutrition guides, supplements, and fitness equipment.

The combined company offers multiple brands.

  • Beachbody Performance nutritional supplements and related products, including BEACHBAR protein bars and Shakeology nutrition shakes.
  • Beachbody on Demand provides premium interactive streaming fitness classes.
  • Openfit is a fitness app providing fitness and nutrition tracking and on-demand classes.
  • Myx Fitness provides a connected home fitness program focused on a stationary bike, competing directly with Peloton and offering more affordable products.
  • BOD Interactive or BODi is a new premium subscription service that gives customers direct access to interactive personal coaching.

This is a comprehensive and synergistic stable of home fitness products.

In its first quarterly report, released on August 13, 2021, $BODY reported a 21% increase in revenue, a 55% increase in subscriptions, and a 75% increase in total streams, all year-over-year. The Company has 3.2 million subscribers.

What we learned from social media patterns:

Social media mentions of $BODY have spiked dramatically in the last week. It was #5 in the top ten trending stocks on Friday, Sept. 17.

The spike coincided with a jump in the share price from $6.18 to $ 7.30 on Sept. 16. Prior to this $BODY showed spikes into the hundreds of mentions when the shares went public in July and on the release of its quarterly report in August.

What we’re seeing is a pattern where every notable event draws a surge of hundreds of mentions in busy threads. That suggests that retail investors are aware of the stock and are watching it. They may not be ready to jump in yet, but continued growth could change that.

Notable comments from Reddit:

“they will be able to cross-market their nutritional products directly on their digital subscription platforms and customers can make purchases directly on the platforms. The convenience is a win for the customers and the additional revenue from their nutrition business is a win for the investors.”

– ItzCheze

“Under the name Beachbody, they plan to be a direct competitor of Peloton, but aiming at the “everyman” market as opposed to the health nut/upper-income market like Peloton. For that reason, their subscriptions and equipment are cheaper.”

– PrincessMonsterShark

???? Signal: David Tepper of Appaloosa Holdings purchased 2 million shares of $BODY in the 3 months before the SPAC went public.

Why $BODY could be valuable:

The fitness industry is expected to grow at a CAGR of 7.21% through 2026.

At-home workouts surged in popularity during the pandemic and many people are staying with them. $BODY began public trading at a time when many analysts thought fitness enthusiasts would be going back to gyms, and posted stellar growth figures.

Beachbody’s Myx product line is well-positioned to provide an affordable alternative to Peloton. The Myx stationary bike is substantially cheaper than Peloton’s and offers several features that Peloton does not have:

  • Handlebar height and depth adjustment.
  • 360° swiveling touch screen supports off-bike workouts.
  • Separate volume controls for coach and music.
  • Smaller bike footprint.

The bike appears to be strong competition for Peloton’s offering, and bike customers will have immediate access to Beachbody’s other products. Myx sold 27,000 bikes in its first year.

Beachbody is positioning itself as a more accessible and affordable alternative to Peloton, targeting the much larger mainstream fitness market.

The Beachbody management team has 20 years of experience in the industry. Arnold Schwarzenegger, Shaquille O’Neal, and LeBron James are actively engaged shareholders contributing visibility and expertise.

$BODY has 96% month-over-month subscriber retention.

Beachbody was profitable for 18 of its 20 years as a privately held company. The Beachbody Company is not profitable primarily due to costs related to the SPAC merger. As those costs are cleared the Company has a solid chance of achieving profitability.

$BODY has $357 million in cash and essentially no debt. The Company intends to invest substantial sums in advertising and marketing aimed at increasing its subscriber base.

Beachbody currently trades at 2.34 times TTM sales. The current revenue growth rate would support a higher valuation, especially if the Company moves closer to profitability in subsequent quarters.

Three analysts currently cover $BODY. The consensus rating is “Buy” with an average price target of $11.63, 65.6% above the current price.

What the risks are:

The Beachbody Company competes with larger companies that have greater resources. They may be unable to grow their market share, especially if competitors introduce products aimed at their target market.

$BODY is built on a sequence of mergers. If the management team is unable to successfully integrate these merged entities the Company’s growth strategy could fail.

The Company could face product liability claims stemming from injuries or other issues involving the use of its products.

Projected valuations rely on continued aggressive growth. If the Company fails to achieve its growth targets the stock price could be affected.

Bottom line: Beachbody is a brand new player shaking up a rapidly growing industry. That makes it a speculative investment, but it’s a speculative investment with a well-established management team and high initial growth figures.

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