Investing.com — Barclays downgraded Gartner (NYSE: IT) to Underweight while raising its price target to $185 from $150 in a note on Friday, as the bank remains cautious on information services companies whose business models could be disrupted by AI.
Analyst Manav Patnaik said Barclays’ structural concerns about the long-term future of names such as Gartner, Thomson Reuters (NYSE: TRI) and FactSet (NYSE: FDS) remain.
That is despite a sharp rally from early October to early November, as investors rotated out of AI winners. Over that period, Gartner rose 27%, Thomson Reuters 25% and FactSet 29%, while the S&P 500 fell 2.2%.
This week’s earnings reactions reinforced that caution, with Gartner falling 13.2% and Thomson Reuters 9.9% on Tuesday.
On Gartner, Patnaik pointed to slowing growth in contract value, the annual value of its subscription contracts, which is exiting the year at a low-single-digit rate.
He said the company’s exposure to a per-seat research model is “already too high for a world in which the macro pressures are likely to continue, let alone disruption in an ‘AI world.'”
Barclays kept its Overweight rating on Thomson Reuters, noting that organic growth in its three largest businesses is near 10%.
“Their data moat still buys it time to compete with the LegalTechs at the moment – albeit there is no room for error or missteps (as they have had in the past),” the analyst wrote.
The bank raised its FactSet target to $305 but kept an Underweight rating ahead of next week’s investor day. It maintained Overweight ratings on Verisk and NIQ, Underweight on Clarivate, and Equal Weight on MGBL.
Barclays said the biggest risk to its cautious calls is a continued unwind of the AI trade. Its strategists also warned that “rates are at a level where buying equities is no longer a no-brainer; and earnings need to do the heavy lifting.”
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