Mizuho Initiates on Fair Isaac (FICO) With an Outperform; Says the Market Has Overreacted

Fair Isaac Corporation (NYSE:FICO) is one of the best falling stocks to invest in now. On April 16, Mizuho analyst Sean Kennedy initiated coverage on Fair Isaac Corporation (NYSE:FICO) with an Outperform rating and a $1,416 price target. Kennedy argued that the market has overreacted to concerns about the company losing ground to a competitor.

The analyst is of the opinion that the market is overestimating how much damage VantageScore, Fair Isaac’s competitor, can actually do. He pointed out that Fair Isaac’s market dominance is not just the result of regulatory requirements but is also deeply embedded in how lenders build their credit systems, how investors assess risk in mortgage-backed securities, and decades of predictive track record that both sides of a loan transaction trust. That kind of entrenchment is difficult to displace, Kennedy stated.

Kennedy noted that beyond the competitive threat, the Mortgage Direct License Program further reinforces Fair Isaac’s position. This program allows Fair Isaac to sell directly to mortgage lenders instead of licensing its scores through the credit bureaus. As a result, the company is able to capture more of the economics from each credit check. This explains why Kennedy sees this program as a meaningful competitive strengthener for Fair Isaac.

The analyst said that Fair Isaac is in a great position to benefit if interest rates fall. If this happens, mortgage refinancing activity would pick up sharply, and since every new mortgage application requires a credit score pull, that would directly increase Fair Isaac’s volume and revenue, Kennedy noted. In his view, therefore, the stock is also a rate-sensitive trade.

Fair Isaac Corporation (NYSE:FICO) is an analytics software company. It develops decision management solutions and credit scoring services for financial institutions, insurers, and businesses. It is best known for the FICO Score, a widely used measure of consumer credit risk.

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