Will Fair Isaac's FICO Score Lose Market Share Due To VantageScore?

Fair Isaac Corp FICO stock came under pressure on last week's announcement of Fannie Mae FNMA and Freddie Mac FMCC are now accepting VantageScore 4.0, which caused investor concerns around an erosion of the "FICO monopoly," according to Needham.

The Fair Isaac Analyst: Analyst Kyle Peterson maintained a Buy rating, while reducing the price target from $2,575 to $1,950.

The Fair Isaac Thesis: The company has "numerous levers," including auto scores pricing, repurchasing shares and streamlining expenses in its software business, which could enable it to drive over 20% earnings growth, Peterson said in the note.

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While FICO Scores are no longer being mandated for lenders is a "big negative" for Fair Isaac, not many lenders may actually adopt VantageScore, as "infrastructure changes will need to be made," the analyst stated.

Also, mortgage credit scores are typically passed onto the consumer and constitute a minute percentage of closing costs, she added.

Fair Isaac's market share losses in mortgage due to the announcement are likely to be "minimal," Peterson said. The stock is still a "high-quality information services asset" and continues to be in the Needham Conviction List, she further wrote.

FICO Price Action: Shares of Fair Isaac had risen by 1.41% to $1,528.41 at the time of publication on Wednesday.

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