Morningstar lowered Intuit’s economic moat rating from wide to narrow. The firm cited increased uncertainty regarding artificial intelligence and its potential to disrupt the company’s competitive advantages. Analysts specifically noted that AI-powered large language models could challenge the user familiarity that underpins Intuit’s switching costs.
The downgrade reflects reduced conviction in Intuit’s ability to generate high returns on invested capital over the next 10 years. Consequently, Morningstar reduced its fair value estimate for Intuit stock to $495 from $535. The firm also increased its uncertainty rating for the company from Medium to High.
Despite these adjustments, Morningstar noted that Intuit shares remain moderately undervalued. The stock has trended upward since reaching a low in February. Analysts suggested that current market fears regarding AI disruption may be overblown given the company’s solid fundamental performance.