Fair Isaac Corporation (FICO): A Bull Case Theory

Core Thesis - Fair Isaac Corporation (FICO) is viewed positively due to its entrenched position in the U.S. financial system, driven by decades of innovation and strategic partnerships, particularly with major credit bureaus [2][3] Company Overview - FICO, founded in 1956, revolutionized credit scoring by introducing data-driven models, which replaced subjective lending judgments [2] - The company solidified its dominance in the mid-1990s when FICO scores became mandatory for mortgage purchases by Fannie Mae and Freddie Mac, creating a durable moat in the market [3] Financial Performance - In fiscal 2024, FICO reported revenues of $1.72 billion, with the Scores segment generating $920 million and the Software segment contributing $798 million [4] - The Scores business benefits from significant pricing power, with fees projected to increase from $0.50–$0.60 in 2022 to $4.95 in 2025 [4] - The Software segment, particularly the cloud-based FICO Platform, saw a 31% growth in Annual Recurring Revenue (ARR), indicating strong adoption of its analytics and decision-making tools [4] Market Position and Challenges - Despite strong fundamentals, FICO shares have declined by 37% from their all-time high due to increased competition from VantageScore, fee increases, and high valuation pressures [5] - The current market sentiment raises questions about valuation and near-term investment risks, positioning FICO as a high-quality business facing temporary headwinds [6] Investment Perspective - The bullish thesis on FICO remains intact, emphasizing its dominant market position and strong pricing power, despite a 22.41% depreciation in stock price since previous coverage [7]