Wedbush Downgrades FICO (FICO) to Underperform; Disappointing Q3 Equals Slowdown Vs. Competitors

November 10, 2009 9:24 AM EST

Wedbush downgrades FICO (Nasdaq: FICO) from Neutral to Underperform. Price target $19

Wedbush analyst says, "We are downgrading shares of FICO to Underperform as we believe they will not keep pace with those of the other companies we cover in the near-term due to the disappointing Q3 results that were released last week. As well, since a large portion of the company’s cash flow and profitability are tied directly to the health and strength of the U.S. consumer, specifically credit card originations and spending, we believe recent data showing a pullback in the average U.S. consumer’s desire to carry credit coupled with a decrease in origination mailings could put further pressure on the company’s results over the next few quarters. Additionally, while FQ4 enterprise bookings of $85M appeared strong on the surface, we would note that those bookings carried longer durations, which are effectively larger discounts to term. While FICO shares could in fact trade sideways and may not even trade down in the near-term, relative to the ~15% average return to target we expect for our sector, we believe FICO shares will not keep pace with the other companies we cover and therefore warrant an Underperform rating. For investors with a long-term, deep-value investment profile, we believe the shares carry much lower risk around $16-17 / share."

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