FICO Stock Has Fallen 43% From Its Peak. Does the Selloff Make Sense?

Key Stats for Fair Isaac Corporation

• 52-Week Range: $870.01 to $1,998.01
• Street Mean Target: $1,440.16
• NTM P/E: ~19x
• LTM Gross Margin: 85.1%
• LTM EBIT Margin: 52.1%
• Market Cap: ~$20.5 billion

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From Nearly $2,000 to Under $950: What Actually Happened Here?

Most people have never heard of Fair Isaac Corporation (FICO). Most people also have a FICO score, and it follows them everywhere. The three-digit number FICO produces sits at the center of nearly every consumer lending decision made in the United States.

Apply for a mortgage, a car loan, a credit card, or a personal line of credit, and the lender on the other side almost certainly pulls a FICO score before deciding whether to approve the application and at what rate. Lenders pay for those scores. FICO collects a fee on every pull.

The company also runs a software business that sells analytics and decision management tools to financial institutions, insurers, and other organizations that need to model risk at scale.

Together, the two segments form something that functions more like infrastructure than a traditional software company.

Lenders depend on FICO scores enough that displacing them would require coordinated industry action that has been discussed for years without producing a real alternative.

None of that changed in 2026. The stock fell anyway, hitting a max drawdown of nearly 45% in April on a combination of broad market multiple compression and specific concerns about regulatory scrutiny of FICO’s pricing practices with mortgage lenders.

The stock has spent most of the year between 30% and 45% below its peak, sitting around 43% off the high as of this writing, despite Q3 FY2026 results showing revenue up 17% year over year and adjusted EPS of $10.13.

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The Business Kept Growing While the Stock Fell

The economics of FICO’s model are genuinely unusual, and understanding them is what makes the 2026 selloff so interesting. An 85% gross margin means almost every revenue dollar above the marginal cost of delivering a score flows straight through to gross profit.

A 52% EBIT margin means more than half of every revenue dollar becomes operating income. These are numbers you associate with the best software businesses in the world, applied to what is effectively a regulated data monopoly with no credible competitor.

Free cash flow grew from $416 million in fiscal 2021 to $770 million in fiscal 2025, nearly doubling over four years with only a brief dip in 2023.

A business that compounds its cash generation at that rate while the stock loses 43% of its value is either facing a genuine structural threat or a valuation reset. The evidence points toward the latter.

FICO has continued raising the price it charges lenders per score, the Scores segment keeps growing revenue, and the Software segment is building an annual recurring revenue base that adds a subscription layer on top of the transactional core. The business did not break. The multiple did.

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What the TIKR Model Says About the Return Potential

The TIKR valuation model mid case puts a price target of around $1,871 on FICO over the next four years, implying roughly 18% annualized returns from current levels.

Revenue growth assumptions run at around 14% annually, consistent with what FICO has delivered historically as it has raised prices and grown the software business in parallel.

The P/E compression assumption is the part worth looking at carefully. The mid case bakes in around 9% annual multiple contraction, acknowledging that the valuation FICO commanded near its peak was unsustainable and unlikely to fully return even as earnings grow.

What the model is saying, in plain terms, is that the business can compound earnings at a healthy clip while the multiple contracts significantly, and the stock still roughly doubles from here over four years. Stretch the horizon to 2034, and the mid-case forecasted return reaches around 265% at roughly a 17.5% IRR.

The Street’s mean target of around $1,440 already implies about 52% upside from current levels, set by analysts who have been watching the regulatory pressure closely and still see significant room.

Should You Buy FICO Stock?

The bull case does not require much imagination. FICO controls infrastructure that the lending industry depends on, the business compounds free cash flow at high rates, no credible replacement for the score is on the horizon, and the stock trades at less than half its peak while earnings keep moving higher.

Around 19 times forward earnings is the most reasonable entry point this business has offered in years.

The bear case is about one thing: regulation. The CFPB and various housing advocacy groups have pushed hard against FICO’s practice of raising per-score prices to mortgage lenders, and any ruling that caps or reverses those increases hits the Scores segment directly.

The software business is growing but is not yet large enough to absorb a meaningful Scores headwind on its own. FICO is a durable business with a real moat, and the regulatory risk is real enough to think carefully about position sizing before jumping in.

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Disclaimer:

Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!