We recently published a list of 12 Stocks That Could Split in the Near Future. In this article, we are going to take a look at where Fair Isaac Corp. (NYSE:FICO) stands against other stocks that could split in the near future.
Stock splits don’t change how much a company is worth, but they make each share cheaper and easier for people to buy, considering it’s a forward split. Stock splits can vary from a simple 2-for-1 split to a larger 100-for-1 split or more. In a 2-for-1 split, each share is turned into two new shares. This makes each share half the price, but the total value of the company remains the same. For example, if a share costs $100, after a 2-for-1 split, you’ll have two shares that cost $50 each. This can make it easier to buy shares and attract more people to invest. Even though the share price goes down, the total amount of money paid out to shareholders stays the same. Hence, splitting shares doesn’t change how much control existing shareholders have in the company. The main goal is to make the company’s stock more appealing to investors. There’s no proof that stock splits make a company better, but they can make investors feel more positive about the company. But with these benefits come the costs and risks. The process requires legal work and can be expensive.
Splitting a stock doesn’t change a good company into a bad one or vice versa. The price might go up a bit after the split, but it won’t change the company’s long-term fundamentals. Sometimes, a low stock price can actually look bad for a big company. Still, many companies practice splitting stocks if their share prices are growing too high.
2025 Outlook
On January 16, Mark Newton, Fundstrat Global head of technical strategy, joined ‘Squawk Box’ on CNBC to discuss that the long-term market trends look positive. The market initially experienced a cooler-than-expected jump, but concerns were raised about the breadth of the market and the potential impact of interest rates on small-cap stocks. Mark Newton expressed a constructive view but noted that the market’s breadth had deteriorated significantly, with only about 25% of stocks currently above their 50-day moving average. This decline was particularly evident in sectors like healthcare, where seven sectors lost more than 4% in the last month.
Despite these challenges, Newton highlighted that technology stocks had rebounded, helping to keep indices afloat and maintaining long-term trends. However, he noted that near-term sentiment had become pessimistic regarding the potential policies of the president-elect, which added to market uncertainty. He maintained his target for the S&P 500 at 6650, suggesting that interest rates might begin to roll over in the coming months, which could be bullish for equities given their recent correlation with treasury yields.
Methodology
We sifted through ETFs, online rankings, and internet lists to compile a list of the top stocks trading over $400 as of January 19. We then selected the 20 stocks with high surges in their share prices in the past 5 years and a history of splitting stocks. From that, we picked the top 12 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A hands-on approach: technicians working on data management products in an open lab space.
Fair Isaac Corp. (NYSE:FICO)
Share Price as of January 19: $1,900.54
Surge in Share Price in 5 Years: 369.30%
Stock Split Confirmed: No
Number of Hedge Fund Holders: 47
Fair Isaac Corp. (NYSE:FICO) is a data analytics company that focuses on credit scoring services. It is known for the FICO Score, which is a credit score widely used by lenders to assess creditworthiness. It also provides other analytics solutions for financial services, healthcare, retail, and telecommunications.
A lot of its growth comes from the Scores segment of the company, which focuses on providing credit-scoring products and services (including B2B and B2C offerings). For the full fiscal year 2024, revenues for the FICO Score segment marked a 19% increase year-over-year. B2B revenue in this segment grew 27% in FY24, primarily due to mortgage originations. This refers to creating new home loans, including the application, approval, and funding stages. However, B2C revenue declined slightly, 2% for the year, mainly due to lower sales on the myFICO.com platform.
Mortgage origination revenues rose by 95% in the last quarter of FY24. For FY25, the company’s wholesale royalty for mortgage originations will be set at $4.95 per score, which represents a small fraction of the total mortgage cost. The FICO Score remains a crucial tool in the $2 trillion mortgage origination market.
Additionally, Fair Isaac Corp. (NYSE:FICO) is seeing strong adoption of its FICO Score 10 T, which has been adopted by major lenders, including United Wholesale Mortgages. This score is now used for credit decisions, securitization, and investor delivery. It’s also set to launch the FICO Score mortgage simulator, which will allow mortgage professionals to simulate potential changes in a borrower’s credit score. This will assist in offering more loan options and better interest rates.
On January 15, Jefferies Financial Group raised the company’s price target from $2,250 to $2,275, maintaining its buy rating on the stock. This raise reflects confidence in Fair Isaac Corp.’s (NYSE:FICO) strong performance and growth prospects in the technology sector. Carillon Eagle Mid Cap Growth Fund reported strong Q3 performance for the company, driven by pricing gains in its Scores business, and anticipated growth in mortgage activity. Here’s what the firm said in its Q3 2024 investor letter:
“Fair Isaac Corporation (NYSE:FICO) provides predictive analytics and data management products and services that enable businesses to automate, improve and connect decisions. The stock performed well during the period as quarterly earnings were strong and guidance was lifted. The quarter was highlighted by continued pricing gains in the company’s Scores business. Additionally, expectations of increased residential mortgage activity as interest rates move lower also aided the stock.”
Overall, FICO ranks 9th on our list of stocks that could split in the near future. While we acknowledge the growth potential of FICO, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FICO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
