Please ensure Javascript is enabled for purposes of website accessibility

Here’s Why Fair Isaac Stock Plunged on Thursday

By Matthew Frankel, CFP® - Updated Mar 13, 2020 at 11:40AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The credit scoring giant has been especially hard hit in the downturn.

What happened

The stock market suffered its worst one-day loss since 1987 on Thursday, March 12. Both the Dow Jones Industrial Average and S&P 500 benchmark indexes fell by nearly 10%.

The financial sector has been one of the worst-performing parts of the stock market in the downturn, and this isn't limited to just banks and insurance companies; financial service businesses are feeling the pressure, too. Fair Isaac Corporation (FICO 4.41%) is one example, down 11.3% for the day on Thursday and more than 36% from its highs reached less than a month ago.

Businessman holding up credit score sign.

Image source: Getty Images.

So what

Consider how Fair Isaac makes its money. The company is best known for its FICO credit scoring model, and some of its revenue comes from subscription-based sources. For example, I pay a monthly fee for the company's myFICO credit monitoring service.

But some revenue is directly tied to consumer spending. As one example, the company gets paid every time a lender checks someone's credit using its platform (which is used in most lending decisions). If consumers are taking out fewer loans, Fair Isaac makes less money. So it shouldn't be a big surprise to see the stock take a hit.

Now what

It remains to be seen whether this will be a short-lived market crash, or if we're entering the early stages of a deeper recession and bear market. Whatever the case, investors certainly are right to be concerned about the company's revenue taking a short-term hit, and that's what we're seeing reflected in the stock price.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fair Isaac Corporation Stock Quote
Fair Isaac Corporation
$395.42 (4.41%) $16.70

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.