Thomson Reuters will benefit from AI, TD Cowen says

TD Cowen analyst Vince Valentini says Thomson Reuters (Thomson Reuters Stock Quote, Chart, News, Analysts, Financials TSX:TRI) is more likely to benefit from AI than be disrupted by it.

As reprted by the Globe and Mail, Valentini maintained his “Buy” rating and $200.00 target on Thomson Reuters. The average target is $169.80.

The analyst said Thomson Reuters, RELX and Wolters Kluwer have been oversold despite little evidence of AI-related disruption to near-term revenue growth or margins.

“We view TRI as the highest quality name in this subsector, and our pecking order is TRI, RELX, and WKL,” Valentini said.

He said Thomson Reuters’ Westlaw and RELX’s LexisNexis have competitive advantages from embedded legal research workflows, deep editorial content and reliability.

“They own not just legal documents, but decades of human legal reasoning, editorial analysis, citation networks, and validation supported by thousands of courts,” Valentini said.

As AI adoption increases, Valentini said legal customers are focused on accuracy, explainability and privacy, which favours established providers with proprietary content and secure systems.

The analyst said legal professionals view reliability and accuracy as the most important features of AI services, and that being right most of the time is not enough in the legal market.

Valentini said Thomson Reuters ranks at or near the top of the group for revenue growth over the next three years, while also having the strongest EBITDA growth and margins.

He noted that the company’s three largest segments account for 85% of revenue and an even larger share of EBITDA.

While Thomson Reuters trades at a slight EBITDA premium to RELX, Valentini said the quality of its assets justifies that premium.

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