What Happened?
Shares of credit reporting company TransUnion (NYSE: TRU) jumped 5.5% in the afternoon session after the stock bounced back from a steep sell-off in the previous trading session, which was triggered by a competitor's move to challenge the credit reporting industry.
The recovery followed a decline of roughly 11% after Fair Isaac (FICO) announced a new program to license its mortgage scores directly to lenders. This new "FICO Mortgage Direct License Program" bypassed the traditional role of credit bureaus like TransUnion, which acted as intermediaries. FICO's decision to offer scores at a significant discount also added pressure on TransUnion's business model. In response to the news from the previous day, Goldman Sachs lowered its price target on TransUnion's stock from $96.00 to $83.00. The stock's gain appeared to be a partial recovery as investors reassessed the initial sharp reaction to the news.
Is now the time to buy TransUnion? Access our full analysis report here.
What Is The Market Telling Us
TransUnion’s shares are quite volatile and have had 15 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 11.2% on the news that Fair Isaac (FICO), the company behind the widely used credit score, announced a new program to license its mortgage scores directly to lenders. This move effectively bypassed the traditional role of the three major credit bureaus, including TransUnion. The new "FICO Mortgage Direct License Program" allowed mortgage lenders to get credit scores straight from FICO, potentially pressuring the earnings and margins of companies like TransUnion, which acted as intermediaries. FICO also announced it would offer the scores at a 50% discount compared to the industry average, a change expected to provide immediate cost savings to mortgage lenders. The news sent shockwaves through the industry, as shares of fellow credit bureaus Equifax and Experian also tumbled, while FICO's stock soared.
TransUnion is down 15.5% since the beginning of the year, and at $77.64 per share, it is trading 28.6% below its 52-week high of $108.67 from October 2024. Investors who bought $1,000 worth of TransUnion’s shares 5 years ago would now be looking at an investment worth $888.78.
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