It goes on $SPGI (+0,15%) .
Here, too, the reasons in brief.
S&P Global went into an irrational sell-off after FactSet lowered its revenue forecast. Sentiment tipped with fears that AI could make financial data providers redundant. The share has fallen around 15 percent from its all-time high. This is precisely where the opportunity lies.
The reality is different. The latest quarterly figures were excellent. CEO Martina Cheung spoke of record figures for turnover, operating profit and earnings per share. Turnover rose by 9 percent, while costs only increased by 2 percent. This led to a margin widening of 330 basis points to 52.1 percent. Earnings per share grew by 22 percent. Management raised its annual forecast for sales growth to 7 to 8 percent and expects an operating margin of 50 to 50.5 percent. Earnings per share are expected to be between 17.60 and 17.85 dollars, which corresponds to growth of 12 to 14 percent. In addition, S&P Global announced a share buyback of 2.5 billion dollars in the fourth quarter.
Concerns that AI could replace S&P Global are unfounded. The ratings business, which accounts for 30 percent of revenue and 47 percent of operating profit, relies on human judgment and decades of reputation. Credit ratings require the assessment of qualitative factors that AI cannot adequately capture. No one will make investment decisions based solely on AI when human expertise is available.
The S&P Global indices, above all the S&P 500, are established benchmarks worldwide. This dominance is the result of decades of work and will not be replaced by AI-generated alternatives. The market intelligence sector is also based on trust and long-standing customer relationships.
AI will not be a replacement, but a tool to increase efficiency. S&P Global can use AI to automate processes, accelerate data analysis and further increase profitability. This is a growth driver, not a threat.
The valuation is attractive. Measured by the price-to-free cash flow ratio, S&P Global is trading well below the historical average. This is a classic overreaction to irrational market sentiment. S&P Global is in the process of bottoming out. If the stock slides again, I will buy the position and further improve the average price.
