Stock Breakdown - FICO

FICO (overview): Core Scores segment (59% rev, 82% op income, 88% margin) dominates mortgage via MBS market inertia & FHFA legacy; weaker moat in credit cards/auto/personal loans where FICO used for safe harbor vs underwriting. Recent mortgage pricing hike $10/score + $33 success fee driving growth. VantageScore competition gaining traction in non-mortgage but lacks 30yr data series for prepayment risk modeling. Software (41% rev, 28% margin) faces build-vs-buy pressure from mega-banks; platform strategy aims to increase switching costs. Stock down 55% from $2375 peak to $1060, now 42x trailing P/E (32x forward). Bulls: early innings of direct reseller program, margin expansion to 50-60%, strong buybacks (63% share count reduction since 2006), CEO owns $400M stake. Bears: VantageScore could erode mortgage dominance long-term, potential tri-merge→bi-merge shift cuts usage 33%, regulatory risk, AI-driven credit models threaten relevance. Base case 10-15% revenue growth + margin expansion = 2-15% annualized return at 20-30x exit multiple; bear case moat erosion = -3% to 4% return at 15x.

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