FICO: Hold Rating Amid Margin Strength and Regulatory Risks

We initiate on FICO with a Hold rating and $1,664 PT. FICO's analytics, platform SW, and global

scoring probity allow financial institutions and enterprises around the world to automate and optimize mission-critical decisions. Beneath FICO's vaunted brand, a tale of two narratives. In the positive corner, fast Platform adoption and strong Score pricing tailwinds. On the negative side, daunting mortgage headwinds and a steady pace of new annual contract conversions. Management's measured marching orders still resonate, even as January's Score reset visibly bolsters revenue run rates (+11%, we estimate) and drives our FY26E high-teens EPS growth forecast (FY25E $27.00 / FY26E $32). We see Street estimates in the comfort zone, with optimism too high for a mortgage usage rebound and outsized ARR inflection. We ground our PT in a 52x forward P/E to balance FICO's moat- enabled margin (58-60%) durability with real regulatory pinch points, specifically the company's evolving pricing model and a recent insider divesture that gives us pause and argue for an appropriate de-rate from today's 76x premium. Recurring software has some weight, but the boost from buybacks is a complement. Our confidence is more with the measured management guidance and slower Platform adoption, and not with the blue sky outlook that has shaped Street. Perhaps a faster-platform ramp and a resolve to regulatory uncertainty can quickly move the needle, but fundamental risk/reward here doesn't suggest an exuberance or a rush to conviction. We see more symmetry than asymmetry here, and a virtue of patience.