BMO reiterates Fair Isaac stock rating on limited FICO displacement

BMO Capital has maintained an Outperform rating and a price target of $1,150 on Fair Isaac Corporation's stock (FICO). Currently trading at $781, the shares have experienced a 54% decline year-to-date. However, InvestingPro data indicates the stock is potentially undervalued at its current valuation, with a PEG ratio as low as 0.59.

The firm's analysis of recent GSE disclosures suggests that Vantage's pricing share may be overestimating immediate FICO displacement. In their sample, 91.9% of the reviewed loans reported both Vantage and FICO scores, with Classic FICO pricing at 67.7% of the total. Only 1.6% of the balances were priced at Vantage while FICO was unavailable.

The firm notes that the adoption of VS4 is mostly driven by refinance activity and is concentrated among a few lenders. UWM's policy of permitting dual-score reporting supports the coexistence of both scoring models. Rocket's use of Vantage remains a potential competitive threat. BMO views these factors as positive for FICO, but insufficient to indicate a significant shift in market share or revenue displacement.

Recently, Fair Isaac has seen several analyst updates following significant regulatory changes and approvals, including the implementation of the company's Direct License Program and the FHFA's decision to place VantageScore 4.0 and Classic FICO on the same pricing grid.