BofA raises Fair Isaac stock target to $3,700, retains Buy rating

On Monday, BofA Securities adjusted its outlook on Fair Isaac Corporation (NYSE:FICO), elevating the price target to $3,700 from the previous $2,800 while maintaining a Buy rating on the stock. The revision reflects a more optimistic assessment of the company’s growth potential following the recent FICO World event. With a current market capitalization of $50.83 billion and impressive returns of 57.17% over the past year, FICO has demonstrated strong momentum. According to InvestingPro analysis, the stock appears overvalued at current levels, trading at a P/E ratio of 88.85.

The analyst at BofA Securities expressed increased confidence in the long-term growth prospects of Fair Isaac after attending FICO World, an industry conference showcasing the company’s products and innovations. This event provided deeper insights into the capabilities of the FICO platform and its potential to become integral to consumer finance, drawing comparisons to Palantir (NASDAQ:PLTR)’s role in its respective industry. The company’s strong fundamentals support this optimistic outlook, with InvestingPro data showing impressive gross profit margins of 80.83% and revenue growth of 14.72% over the last twelve months.

BofA’s new price objective is based on a three-stage discounted cash flow (DCF) model that projects free cash flow (FCF) growth rates of 30%, 15%, and 2% over the periods of years 6-10, 11-15, and terminal value (TV), respectively. The terminal value is calculated using a perpetual growth method, indicating sustained growth over an extended period.

The analyst highlighted three main catalysts expected to drive software growth for Fair Isaac: the transition of Falcon Fraud to the FICO platform, the launch of the FICO marketplace, and the introduction of FICO’s new artificial intelligence model trained on financial data. These developments are anticipated to significantly contribute to the company’s expansion in the financial industry.

Fair Isaac Corporation, known for its credit scoring models, is poised to enhance its position as a key player in consumer finance technology, with BofA Securities’ revised price target suggesting a strong vote of confidence in the company’s future direction and financial performance. InvestingPro analysis reveals a "GREAT" overall financial health score, with strong performance across growth, profitability, and momentum metrics. Subscribers can access 15+ additional ProTips and comprehensive financial analysis in the Pro Research Report, providing deeper insights into FICO’s valuation and growth prospects.

In other recent news, Fair Isaac Corporation (FICO) reported its second-quarter earnings for fiscal year 2025, surpassing earnings expectations with a non-GAAP EPS of $7.81, compared to the forecasted $7.40. However, the company’s revenue slightly missed expectations, reaching $498.7 million against the anticipated $499.58 million. Despite the earnings beat, FICO’s stock experienced a decline in after-hours trading. Additionally, FICO announced the pricing of $1.5 billion in senior notes due in 2033, with a 6.000% yield. The proceeds from this offering are intended to repay existing debts and support general corporate purposes. These notes are offered to qualified institutional buyers and non-U.S. persons, exempt from registration under the Securities Act of 1933. The company also maintained its fiscal year 2025 guidance, anticipating moderate expense increases later in the year. Lastly, the company continues to focus on innovation and expanding partnerships to bolster its competitive position.

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