Wells Fargo Lowers Price Target for FICO Amid Regulatory Uncertainty

Wells Fargo has reduced its price target for FICO from $2,600 to $2,300 while maintaining an Overweight rating due to regulatory uncertainty surrounding the Federal Housing Finance Agency's acceptance of Vantage Score 4.0. Analysts expect an average price target of $2,213.09, a 29.94% upside from the current price. The company reported strong Q1 2025 results, with revenue up 15% YoY and GAAP net income up 25% YoY.

Wells Fargo has lowered its price target for Fair Isaac (FICO) from $2,600 to $2,300 while maintaining an Overweight rating, citing concerns about potential regulatory changes in mortgage credit scoring [1]. The adjustment comes following the July 8 announcement that government-sponsored enterprises (GSEs) will accept VantageScore 4.0, though the Federal Housing Finance Agency's (FHFA) stance on FICO's mandate for conforming mortgages remains unclear.

Analysts expect an average price target of $2,213.09, a 29.94% upside from the current price, reflecting diverse views on FICO’s prospects. Despite market uncertainties, FICO maintains impressive gross profit margins of nearly 81% and operates with moderate debt levels [1].

Wells Fargo noted that even if lenders gain optionality between scoring models, FICO remains deeply embedded in existing lending systems, and shifting processes would be time-consuming and costly for lenders, potentially limiting immediate changes in market share. The firm expressed concern that FICO will likely be more measured with its mortgage score pricing due to increased regulatory scrutiny, leading Wells Fargo to model a more modest price increase from $4.95 to approximately $6.50 next year.

In other recent news, FICO has announced plans to introduce new credit scoring models incorporating buy now, pay later (BNPL) loan data, set to launch in Fall 2025. This marks a significant development as FICO aims to provide lenders with a more comprehensive understanding of consumers’ repayment behaviors. Meanwhile, the Federal Housing Finance Agency (FHFA) has allowed mortgage lenders to use VantageScore 4.0, which could pose increased competition for FICO in the mortgage credit scoring market [1].

Despite these developments, both Goldman Sachs and Raymond James have maintained positive ratings for Fair Isaac, citing the company’s strong market position and the continued preference for FICO scores in the mortgage-backed security ecosystem. Baird has upgraded Fair Isaac’s stock from Neutral to Outperform, though it lowered the price target to $1,900, reflecting confidence in the company’s resilience despite recent regulatory challenges [2].

FICO reported strong Q1 2025 results, with revenue up 15% YoY and GAAP net income up 25% YoY, demonstrating the company's continued financial strength. However, corporate insider sentiment remains negative, with an increase in insiders selling their shares over the past quarter [2].

Investors continue to monitor these developments closely, especially considering the implications for FICO’s role in the credit scoring industry. The regulatory shifts may not materially impact the company, according to RBC Capital, which remains optimistic about FICO’s prospects.

References:
[1] https://za.investing.com/news/analyst-ratings/wells-fargo-lowers-fair-isaac-price-target-to-2300-on-mortgage-score-concerns-93CH-3783196
[2] https://www.theglobeandmail.com/investing/markets/stocks/FICO/pressreleases/33311540/fair-isaac-fico-new-buy-recommendation-for-this-technology-giant/