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Investing.com - Fair Isaac Corporation (NYSE:FICO), currently valued at $39.38 billion and maintaining impressive gross profit margins of 80.83%, held its position after the Federal Housing Finance Agency (FHFA) announced a policy change allowing mortgage lenders to use VantageScore 4.0 as an alternative to FICO scores for loans purchased by Fannie Mae (OTC:FNMA) and Freddie Mac (OTC:FMCC). InvestingPro analysis shows the company maintains a strong financial health score, with 12 key investment tips available for subscribers.
FHFA head Bill Pulte announced Tuesday that the agency would permit lenders to use VantageScore 4.0 without requiring new infrastructure, maintaining the existing tri-merge requirement. This decision differs from the FHFA’s previous paused plan that would have required both FICO and VantageScore for mortgages purchased by government-sponsored enterprises (GSEs).
Raymond (NSE:RYMD) James maintained its Outperform rating on Fair Isaac with a $2,230.00 price target following the announcement. The firm noted that while FICO scores will no longer be mandatory for GSE-purchased mortgages, the tri-merge requirement remains intact, preserving three revenue events for FICO when its scores are used. According to InvestingPro data, analyst targets range from $1,364 to $3,700, reflecting varied opinions on the stock’s potential, which currently trades at a P/E ratio of 71.72.
The investment bank highlighted several factors that may help FICO maintain its market position despite the new competition, including the mortgage-backed security ecosystem’s familiarity with FICO scores and lenders’ established risk models built around FICO metrics.
Raymond James also pointed out that FICO already competes successfully in auto, personal loan, and credit card markets without regulatory mandates, suggesting the company’s ability to maintain its position in a competitive environment. The company’s strong market position is reflected in its 14.72% revenue growth and robust return on assets of 32.61%. For detailed analysis and comprehensive insights, investors can access the full Pro Research Report available on InvestingPro.
In other recent news, Fair Isaac Corporation announced plans to launch two new credit scoring models that incorporate buy now, pay later (BNPL) loan data, with availability slated for Fall 2025. This development aims to offer lenders enhanced visibility into consumer repayment behaviors by integrating BNPL transactions with traditional credit data. In analyst updates, Baird upgraded Fair Isaac’s stock rating from Neutral to Outperform, citing an attractive risk/reward scenario despite recent regulatory challenges, while lowering the price target to $1,900. Jefferies also raised its price target for Fair Isaac to $2,500 and maintained a Buy rating, highlighting optimism about the company’s scoring business and software platform. Similarly, BofA Securities increased its price target to $3,700, retaining a Buy rating, based on the company’s growth potential and innovations showcased at the recent FICO World event. Concerns over potential changes in the mortgage credit scoring landscape have sparked discussions, notably regarding the privatization of Government-Sponsored Enterprises (GSEs) and possible shifts from tri-merge to bi-merge credit scores. Despite these challenges, analysts from RBC Capital remain positive, believing that FICO’s pricing power and industry standard status will remain intact. These developments reflect a dynamic period for Fair Isaac as it navigates regulatory challenges and seeks to capitalize on emerging opportunities in the financial services sector.
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