Morningstar popped up on my recent Charlie Munger 200 week moving average screen. It will produce some high quality businesses at a great price but the screen will also surface potential value traps.

When I first saw MORN my initial thought was value trap. Strong historical returns, brand recognition, but two staring down two secular headwinds eating away at its business.

1. The shift from active mutual funds to passive ETFs. 2. Generative AI threatening to commoditize packaged research and financial data

So far the market agrees.

MORN traded at 36.6× EBITDA in early 2024. It sits at roughly ~10.5× today. A multiple last seen during the GFC.

I took a segment by segment look to see if I could disprove this bear case.

Morningstar Direct Platform

This is what people think of when they think Morningstar. The data feeds and analytical tools on advisors' and analysts' desktops.

Licensed user growth has gone essentially flat since late 2023. From 18,562 to 18,810 over six quarters.

The shift from active to passive, mutual fund to ETF, didn't hurt Morningstar Direct as one would think. The reason is Direct’s customer is not the mutual fund investor. It is the financial professional who needs to analyze investments of any structure.

An advisor building a client portfolio in 2026 still has to compare expense ratios, holdings, factor exposures, tracking error, and historical performance. The advisor is agnostic to whether the asset is a mutual fund or an ETF.

The AI threat really isn’t about churn or losing existing customers, it's about losing the battle for future customers. Net retention was ~104% for Morningstar Direct and ~101% for Morningstar Data in 2025. Existing customers are staying and spending. But will Morningstar win future customers?

Right now it’s a decelerating business, not a declining one.

PitchBook

This is the crucial business segment that confirms or disproves the bears.

Revenue grew 3.2× from 2020 to 2025. Margins went from a 2022 trough of 16% back up to 31.3%.

The AI disruption story makes sense but then you have to ask where does AI get its private markets data? From PitchBook.

It has decades of deal data, fund returns, LP commitments, portfolio company financials. And these were never posted on the web so an LLM can’t scrape it

Morningstar recognized this and went on the offensive. Data/distribution partnerships with OpenAI, Anthropic, Microsoft, Perplexity. MCP servers. AI APIs.

Morningstar is also trying to turn PitchBook from just a private-markets database into a broader research platform by adding more asset classes and analytical layers.

They’ve added analyst-driven public equity research to the database. It also aggregates third-party research from nine outside partners.

Morningstar bought Leverage Commentary & Data (LCD) from S&P in 2022. This brings leveraged loan and high yield bond data into PitchBook Credit. They also bought Lumonic to improve portfolio monitoring of credit positions.

The problem is that all this investment and expansion has not changed PitchBook’s revenue deceleration.

Organic revenue growth decelerated from 30%+ in 2021 to 8.5% in 2025. Q4 2025 came in at 5.9%. The lowest quarter so far. Licensed users were essentially flat year-over-year.

PitchBook is either settling into mature-SaaS growth rates (high single digits) with AI partnerships as the reacceleration catalyst, or it's structurally breaking and heading sub-5%.

The next four quarters become crucial.

DBRS / Morningstar Credit

The fourth-largest credit rating agency globally. One of only four agencies the ECB recognizes. The other three are S&P, Moody's, and Fitch.

Revenue fell for two straight years as the Fed hiked and CMBS/RMBS issuance collapsed. Then the cycle turned: +35.1% in 2024, +27.9% in 2025. DBRS has been taking share as a credible "diversity alternative" to the big three. Post-2008, issuers have structural incentives to get a second rating from a non-big-three agency.

Least disruptable segment. An LLM cannot assign an NRSRO-recognized credit rating. And it’s not at threat from the active to passive shift.

Morningstar Indexes

Morningstar closed the $365M acquisition of CRSP in February 2026. CRSP's US Total Market Index is the benchmark Vanguard's Total Stock Market Fund (~$2T AUM) is contractually required to track.

Pre-acquisition, Indexes was a subscale also-ran at ~$88M revenue. Post-CRSP, they jump to #4 globally with $4.2T of assets benchmarked and a higher ETF share than every provider except S&P Dow Jones.

But now they have customer concentration risk and Vanguard is famously price-sensitive. They left S&P for CRSP in 2012 specifically over pricing.

Morningstar is investing into the secular trend of active to passive and AI is not a threat to the index business, as I can see right now.

Morningstar Wealth

This one is a melting ice cube business. ~$255M revenue, low single-digit margins, highly competitive TAMP market with no real differentiation vs. large players like Envestnet.

Management recognizes it. They're sunsetting TAMP assets and unwinding the business. Removing the drag could add 100-200 bps to consolidated margins.

Bears Disproven?

No.

I don’t think I can completely disprove the bears but what I see doesn't fully support it either.

Morningstar's two largest divisions are decelerating but still growing with net retention above 100% like mature businesses do. Indexes, Credit, and Retirement are structurally fine. Wealth is being wound down.

Again, the key business to watch going forward is Pitchbook and whether or not it can reaccelerate its growth.

Morningstar is also not the only financial data and services company that has taken a hit due to AI concerns.

Would you rather own Morningstar than S&P Global or Moody’s? The the two dominant players in ratings, and S&P Global also owns S&P Dow Jones Indices.

Would you choose Morningstar’s ETF and index business over MSCI’s?

The next step would be to see what expectations the market is pricing in today and if it's too pessimistic creating an opportunity.

There are no bad assets, just bad prices. Howard Marks