Fair Isaac's (FICO) recent stock decline, driven by concerns over GSE privatization, changes in FHFA leadership, and mortgage volume risks, presents an investment opportunity, RBC Capital Markets said in a note Wednesday.

The company's strong pricing power remains intact, with mortgage score prices rising sharply from around $0.50 in 2022 to $3.50 in 2024, and further increases expected in 2025 and beyond, the investment firm said.

Software annual contract value bookings rebounded in Q1, suggesting platform annual recurring revenue growth could accelerate from 20% to 30% by the end of fiscal 2025, according to the note.

While GSE privatization could widen mortgage spreads and increase home purchase costs, RBC believes Fair Isaac remains the industry standard for mortgage-backed securities, making a shift to alternative credit scores less likely. Additionally, as GSEs do not pay for credit scores, the incentive to adopt alternatives is lower.

The new US Federal Housing Finance Agency director under a Trump-led administration is expected to deprioritize new mortgage regulations, delaying the transition to bi-merge reports and alternative credit scores, supporting the company as the primary scoring provider, according to the analysts.

There is no set timeline for the transition to bi-merge reports and alternative credit scores, and RBC believes Fair Isaac may take a more aggressive approach to mortgage score pricing in 2026 and beyond.

RBC upgraded Fair Isaac's stock to outperform from sector perform and raised its price target to $2170 from $2040.

Shares of Fair Isaac were up 4.3% in recent trading.

Price: 1895.50, Change: +78.74, Percent Change: +4.33