Acquisition rumors of Global Payments spark valuation discussions! "Big Short" Burry: The real opportunity lies in Fiserv (FISV.US) and PayPal (PYPL.US)

According to Zhitong Finance APP, "Big Short" Michael Burry believes that the potential acquisition valuation for payment processor Fiserv (FISV.US) is between $100 and $120 per share. He also reiterated that PayPal (PYPL.US) is a "good pitch;" previously, reports stated that private equity is showing interest in its competitor Global Payments (GPN.US), making industry valuations a focus of attention.

Opportunities in Fiserv’s “Forbidden Zone”

The acquisition scenario given by Burry, ranging from $100 to $120, implies an upside of 100% to 140% from Fiserv’s current market price. He estimates this range by applying the valuation assumptions of the potential Global Payments acquisition.

In his latest Substack post, he stated, "Compared to Global Payments, Fiserv is more profitable, only slightly more expensive as an acquisition target, and has better asset quality."

He said that the stock’s struggling performance partly reflects a loss of investor confidence. He said: "Due to former management’s overly optimistic growth targets and undisclosed gains from Argentina’s hyperinflation, Fiserv has remained in a 'forbidden zone.' Such a trust deficit is not easily repaired on Wall Street, even with a new management team."

Burry is maintaining a full position and says new deal activity could bring forward potential returns. He said, “In summary, I see this situation as an opportunity. Remember, insiders have been making heavy purchases at these low levels.”

This acquisition comparison assumes the new owner can change strategy, cut costs, and reallocate cash flow. Burry stated that for common shareholders, Fiserv’s current trading price is about 1.6 times his IV15 benchmark. By IV15, he means the price at which he expects to achieve an annualized return of 15% over 15 years.

Fiserv will report its third-quarter results on Tuesday.

Global Payments Acquisition Boom Questioned

After reports that Clayton, Dubilier & Rice is teaming up with its largest shareholder GTCR to pursue a buyout, Global Payments’ stock surged as much as 18% last Friday. GTCR acquired a 15% stake in Global Payments through its $24.25 billion Worldpay acquisition in January. Global Payments also sold its Issuer Solutions business to Fidelity National Information Services (FIS.US).

However, Burry is skeptical about Global Payments' acquisition strategy and adjusted earnings. He said: “From a minority shareholder’s perspective, I’ve always seen Global Payments as a serial acquirer destined to continue purchasing companies at poor rates of return, with limited value.”

Even assuming improved capital allocation, his entry price range for a controlling buyer seeking a 15% annualized return is $45 to $60, about 38% to 54% below the current level. At that market price, he estimates a controlling buyer could get a 10% return. His valuation for FIS is $18 to $26, about 33% to 53% below the last closing price.

Nevertheless, he still sees this as a potential catalyst for competitors. He said: “However, the acquisition of Global Payments should validate the value of other traditional payment networks. It may even make them acquisition targets as well.”

Bullish on PayPal, the “Good Pitch”

Burry remains optimistic about PayPal, though he says its business is not easily comparable to Global Payments.

He stated: "It is currently trading at about 0.80 times IV15 and is a 'good pitch' at a price in the low $50s." He described his position size as between small and normal. His bullish stance predates the latest deal speculation. In July, he questioned Stripe and Advent's offer of $60.50 per share, believing buyers seeking control of PayPal should pay a higher price.

At the time he said: "Sixty dollars and fifty cents is too low. I wouldn’t sell—I think this is just an initial offer." Reportedly, Stripe and Advent abandoned the acquisition in August.

Outside of payments, Burry increased call options on Sprouts Farmers Market (SFM.US) expiring in 2028 and on JD.com (JD.US) expiring in 2029. He also added to BYD, calling the automaker a medium position and JD a large position.