Redburn upgrades Caiji Group rating, stating that core software can withstand AI impact

Investing.com - Redburn, a Rothschild company, has upgraded Intuit Inc from Neutral to Buy, stating that the company’s core software products are among the most resilient against AI disruption.

The broker has raised its target price from $670 to $700, indicating approximately 46% potential upside.

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Redburn states that Intuit’s main applications, including QuickBooks and TurboTax, benefit from extensive data sets, complex regulatory environments, and strong network effects, which are difficult for AI-driven competitors to replicate. Analysts say these advantages give the company pricing power and support steady growth.

The broker expects Intuit to achieve about 13% annual revenue growth and approximately 15% annual free cash flow growth over the next five years.

As Redburn’s view emerges, investors are reassessing valuations of enterprise software, concerned that new AI tools could disrupt traditional applications. The company notes that as the market attempts to price in this risk, valuations across the sector have fallen to historic lows.

Analysts believe that while AI may cause short-term pricing pressures, many established software companies maintain strong competitive advantages due to embedded data and business logic within their systems.

For Intuit, the broker states that its products rely on complex regulatory frameworks, deep domain knowledge, and long-term customer relationships, which limit the risk of new AI tools easily replacing them.

Redburn adds that companies with unique data sets and complex operational logic are better positioned in the so-called “intelligent layer” built on top of existing enterprise software by leading AI developers.

The broker also points out that SAP SE and ServiceNow are companies with strong defenses against AI disruption. It states that these vendors benefit from extensive enterprise data and integrated workflows, which are difficult for external AI tools to replicate.

Redburn notes that as AI tools reduce switching costs between vendors, enterprise software companies may face short-term pressures, but it believes that stock prices have already overreacted to these risks.

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