Bank of America (BofA) has recently lowered its forecasts for Experian but continues to maintain a buy recommendation on the company. This decision comes as Experian expands its software-as-a-service (SaaS) offerings, which now constitute approximately 20% of its revenue.
BofA’s Outlook on Experian
While the forecast for 2026 appears softer, BofA sees potential for midterm growth and improved operating leverage for Experian. As the company increasingly leverages its data and shifts towards higher-margin software, investors might need to reassess their valuation approaches.
The Role of AI in Data Ownership
Experian serves as a significant example of the value embedded in data ownership, particularly as artificial intelligence (AI) continues to evolve. Businesses that own vast datasets could experience a substantial competitive edge, reflecting a changing market dynamic.
Transforming Revenue Streams
- SaaS Integration: The increasing SaaS revenue stream positions Experian favorably compared to traditional revenue models.
- Revenue Stability: A greater reliance on recurring revenues may drive steadier valuations for companies like Experian.
- Data Superiority: Access to unique datasets can provide Experian with an advantage over competitors.
This trend highlights a significant shift in the business model of credit bureaus, transforming them into more platform-like operations. Historically, these businesses thrived on volume and cyclical trends. Now, as they incorporate data into subscription-based software, there is potential for higher margins and the ability to scale profits at a faster rate than costs.
Conclusion
Even with minor forecast adjustments, the long-term potential for companies like Experian remains largely intact. By embracing the advantages of SaaS and focusing on the assets of data ownership, Experian is poised to navigate the current economic environment effectively. Investors should remain vigilant for opportunities in firms that leverage their data assets in this evolving landscape.
