We came across a bullish thesis on Morningstar, Inc. on Rebound Capital’s Substack. In this article, we will summarize the bulls’ thesis on MORN. Morningstar, Inc.'s share was trading at $216.38 as of December 1st. MORN’s trailing and forward P/E were 24.62 and 19.19 respectively according to Yahoo Finance. Morningstar, Inc. (MORN) is best known for its consumer-facing investment research, but the bulk of its revenue stems from premium data subscriptions sold to financial institutions. Its flagship platf ...

Group 1: Fund Performance - Baron FinTech Fund experienced a decline of 4.29% in Q3 2025, compared to a 1.90% decline in the FactSet Global FinTech Index [1] - Since inception, the fund has achieved an annualized return of 11.10%, outperforming the benchmark's 4.00% return [1] - Market strength in the quarter was driven by the resumption of Federal Reserve rate cuts and optimism surrounding AI [1] Group 2: Morningstar, Inc. Overview - Morningstar, Inc. (NASDAQ:MORN) is a leading investment research services provider with a market capitalization of $8.801 billion [2] - As of November 15, 2025, Morningstar's stock closed at $211.95 per share, with a one-month return of -2.86% and a 52-week decline of 36.61% [2] Group 3: Morningstar, Inc. Analysis - The decline in Morningstar's shares is attributed to a broad pullback in information services stocks due to concerns over generative AI and a market rotation away from high-quality companies [3] - Despite a modest slowdown in PitchBook, Morningstar's private markets data platform, which still grew revenue by 10% in the recent quarter, concerns regarding AI are viewed as overblown [3] - The company is expected to see faster revenue growth and margin expansion over time, maintaining the value of its investment data and proprietary insights [3] Group 4: Hedge Fund Interest - Morningstar, Inc. was held by 44 hedge fund portfolios at the end of Q2 2025, an increase from 41 in the previous quarter [4] - While Morningstar is recognized for its investment potential, certain AI stocks are considered to offer greater upside potential and less downside risk [4]

Financial Performance - Morningstar's revenue increased from $227.1 million in 2005 to $2,275.1 million in 2024[42] - The company's revenue grew by 11.6% in 2024, reaching $2,275.1 million[142] - Adjusted operating income increased by 51.2% to $493.8 million in 2024[142] - Free cash flow increased by 127.5% to $448.9 million in 2024[142] - In Q1 2025, revenue increased by 7.2% to $581.9 million[145] - Adjusted operating income in Q1 2025 increased by 22.2% to $135.4 million[145] Segment Performance - Morningstar Direct Platform's revenue increased by 5.5% in 2024[113] - PitchBook's revenue increased by 12.0% in 2024[116] - Morningstar Credit's revenue increased by 35.1% in 2024[121] - Morningstar Wealth's revenue increased by 8.0% in 2024[124] - Morningstar Retirement's revenue increased by 15.0% in 2024[128] - Corporate and All Other (including Morningstar Indexes and Sustainalytics) saw revenue increase by 29.3%[131] and decrease by -0.8%[131] respectively in 2024 Market Opportunity - The global spend on financial data/analysis is a $44.3 billion market with a 6.4% year-over-year growth[52, 53] - The managed account market size is $13.8 trillion with a 20.0% year-over-year growth[55] - The global indexes industry revenue is $6.4 billion with a 12.8% year-over-year growth[55]

Financial Data and Key Metrics Changes - In 2024, the company achieved revenue growth of 11.6%, with organic growth at 11.8%, reaching $2.275 billion for the first time [72][73] - Adjusted operating income increased from $326 million in 2023 to $494 million in 2024, representing a 51% growth in operating margin [73][84] - For Q1 2025, revenue growth was reported at 7.2%, with organic growth at 9.1%, and adjusted operating income grew by 22% [74][75] Business Line Data and Key Metrics Changes - Morningstar Direct, the largest reportable segment, grew from $700 million to $788 million, maintaining strong margins [88] - PitchBook revenue increased from $450 million in 2022 to $618 million in 2024, with margin expansion from 15.9% to 30% [89] - Morningstar Credit had a significant year, contributing meaningfully to adjusted operating income, while Morningstar Wealth improved from a negative profitability position to a neutral one [90][91] Market Data and Key Metrics Changes - The company noted a significant expansion in the institutional client base, which has grown from 750 clients at the time of the IPO to a much larger number in 2024 [39] - The private credit market is highlighted as a key growth area, with increasing demand for related services and products [47][49] Company Strategy and Development Direction - The company aims to leverage insights and AI to enhance efficiency and productivity, focusing on removing friction in client interactions [41][42] - Morningstar's strategy emphasizes building a strong balance sheet to support long-term growth and resilience against market fluctuations [34] - The company is committed to expanding its capabilities in private markets and enhancing its data offerings to meet evolving client needs [48][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to continue delivering growth and profitability, emphasizing the importance of a strong economic moat [76][94] - The leadership team is focused on capitalizing on market opportunities, particularly in the areas of private credit and wealth management [62][64] - The company recognizes the challenges in the Sustainalytics business and is working on restructuring its product offerings to better meet market demands [63] Other Important Information - The company celebrated its 20th anniversary as a public entity, reflecting on its growth and the benefits of being publicly traded [20][22] - A new Chief Strategy Officer was announced, indicating a commitment to strategic growth and continuity within the management team [30] Q&A Session Questions and Answers Question: What is the outlook for Morningstar's growth in the coming years? - Management indicated optimism about growth opportunities, particularly in private credit and the expansion of the institutional client base [39][47] Question: How is the company addressing challenges in the Sustainalytics business? - The company is focusing on simplifying its climate solutions and ensuring that its product suite meets market needs [63] Question: What are the key areas of investment for Morningstar moving forward? - The company plans to invest in technology and data capabilities to enhance its service offerings and drive growth [78][80]

Financial Performance - Revenue increased by 72% to $5819 million in Q1 25, with organic revenue growth of 91%[13] - Adjusted Operating Income increased by 222% to $1354 million in Q1 25[13] - Free Cash Flow decreased by 12% to $588 million in Q1 25[13] - Morningstar Direct Platform revenue increased 13% to $1992 million, with organic growth of 42%[49,50] - PitchBook revenue increased 109% to $1637 million, with organic growth of 111%[57,58] - Morningstar Credit revenue increased 211% to $730 million, with organic growth of 232%[66,67] - Morningstar Retirement revenue increased 158% to $329 million, with organic growth of 158%[87,88] Segment Performance - Morningstar Wealth revenue increased 39% to $613 million, with organic growth of 79%[80,81] - Morningstar Indexes revenue increased 150% with organic growth of 157%[108] - Morningstar Sustainalytics revenue decreased 65% with organic decrease of 49%[108] Other Metrics - Direct Licenses increased by 06% to 18799[105] - PitchBook Licenses increased by 136% to 126285[107]

Core Insights - Morningstar has completed two strategic acquisitions to enhance its capabilities in private credit and structured finance [1] - The acquisitions include Lumonic Inc., focused on private credit portfolio monitoring and management, and Dealview Technologies Limited, which provides standardized data services for CMBS and CLO [1] Group 1: Comprehensive Service Ecosystem - Morningstar is building a comprehensive service ecosystem that covers both public and private investment markets, leveraging PitchBook for extensive private data and insights [2][3] - The integration of Lumonic and DealX aims to enhance transparency in the credit market and empower investors with comprehensive portfolio solutions [3] Group 2: Lumonic's Role in Private Credit - Lumonic, established in 2023, is designed for private credit institutions, offering automated compliance monitoring and AI-driven portfolio analysis [4] - The acquisition allows PitchBook to enter the rapidly growing private credit portfolio management sector, enhancing client management efficiency [4] Group 3: DealX's Contribution to Structured Finance - DealX has a strong foundation in standardized data for CMBS and global CLO, which complements Morningstar's credit rating capabilities [5][6] - The acquisition will enhance the functionality of the CRE Analytics platform, addressing the increasing demand for high-quality standardized reporting in structured finance [6]