Experian caught in the AI crossfire, but fundamentals still standing, says UBS Proactive uses images sourced from Shutterstock
Experian PLC has been swept up in the market’s broader anxiety about AI disruption, but UBS argues the sell-off has gone further than the fundamentals justify.
The bank says fears around artificial intelligence undermining data and software businesses need to be taken seriously, which is why it has carried out a deep dive into Experian’s barriers to entry, customers, regulation and potential new competitors. The conclusion is that most of the group’s earnings remain well protected, even if some software and subscription revenues face longer-term challenges.
UBS notes that large-scale AI deployment among Experian’s customers is still at an early stage, with fewer than 5% meaningfully using it today. While the shares may stay volatile and driven by top-down AI themes for now, the broker is comfortable forecasting roughly 10% mid-term profit growth.
The valuation disconnect is doing much of the work. Experian shares are down about 35% and now trade on less than 18 times earnings, which UBS says implies growth of just 4-5%. That looks pessimistic against its own assumptions.
There are risks. UBS flags the danger of Experian drifting towards a “data utility” if competition intensifies. Even so, it sees the risk-reward skewed to the upside, reiterating a buy despite trimming its price target to reflect higher uncertainty.