Fiserv, Shift4, Toast Stocks Tumble on Earnings. Analysts Are Optimistic Anyway.

Analysts expect Cash App owner Block to post adjusted earnings of 70 cents on revenue of $6.3 billion in the second quarter, according to Bloomberg. (Dreamstime)

Shares of point-of-sale providers have been volatile in the wake of a deluge of earnings reports, but fundamentals aren’t wholly to blame.

That’s according to Mizuho analysts led by Dan Dolev, who doubled down on their bullish perspective on a handful of fintech stocks Wednesday.

POS providers Toast , Shift4 Payments , and Fiserv all posted second-quarter earnings in recent weeks, “with stock reactions notably volatile,” the Mizuho team wrote.

Shift4 and Fiserv fell double-digits on the days their respective reports were released. Toast, the analysts noted, traded “moderately lower” after earnings were posted late Tuesday, and ended Wednesday’s session down 3.7%.

The culprit was often a less-than-perfect report amid high expectations. Fiserv, for instance, reported adjusted earnings and revenue above Wall Street expectations, though organic revenue growth for its merchant solutions segment, which includes point-of-sale system Clover, came in lower than anticipated. Toast, similarly, edged past consensus estimates, but the stock reaction indicated that investors expected more.

Others, like Shift4, missed on several key metrics. Second-quarter adjusted earnings came in below expectations, while payment volume, a key performance indicator, was lower than expected. The company’s announcement Tuesday that its chief financial officer, Nancy Disman, will retire effective Sept. 1 also weighed on shares. The stock closed down more than 15% Wednesday.

The Mizuho analysts questioned whether fundamentals could be to blame for the market reaction, or if something else was afoot. To assess business health, the analysts examined each company’s share of U.S. card network volumes using Visa and Mastercard —two of the largest credit-card networks in the country—as a reference point.

Not all businesses are created equal. The Mizuho team found that Toast’s share gains accelerated year over year in the second quarter, while both Shift4 and Fiserv, through its point-of-sale platform Clover, “experienced slight moderation in their pace of share gains.”

In the Mizuho team’s view, these results have implications for Cash App parent Block, which is slated to report second-quarter earnings after the closing bell Thursday. The analysts noted that the Street is modeling roughly $63.5 billion in gross payment volume, which would imply an improvement in Square’s incremental year-over-year share of Visa and Mastercard volumes.

The Mizuho team reaffirmed an Outperform rating on both Block and Fiserv, with a $71 and $165 target price, respectively. The firm also boosted its price target on Toast stock to $57 from $49 “to reflect strong fundamentals,” while reiterating an Outperform rating.

While the Mizuho analysts maintained Shift4 at Outperform, they lowered their price target to $107 from $115, citing “M&A integration risk” on the heels of the company’s acquisition of Global Blue last month.

The Mizuho team also raised its price target on Mastercard stock to $666 from $610, citing a boost to the card company’s full-year net revenue outlook, which indicates consumer spending will remain healthy.

Only time will tell whether Block can live up to the Street’s lofty expectations. Analysts polled by Bloomberg are looking for adjusted earnings of 70 cents on revenue of $6.3 billion. The FactSet consensus estimate is slightly lower, at 63 cents.

Through Wednesday’s close, Block shares have declined 10% this year. Peers Shift4 and Fiserv have fallen 21% and 35%, respectively. Toast, up 26%, is the only stock that isn’t in the red.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com