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For years, I had only one grievance concerning the RELX (LSE: REL) shares. They have been too costly. That’s not an issue because the FTSE 100 information specialist takes an absolute beating. So is it time to fill my boots?
RELX has plunged 50% over the past yr, with most of that harm, a brutal 35%, coming within the final month. The perpetrator? Fears that synthetic intelligence will blow up its subscription-based enterprise mannequin by providing clients comparable providers at no cost.
The panic adopted the launch of AI-powered authorized chatbot Claude by US agency Anthropic. Buyers have dumped analytics and information shares throughout the board. Experian, London Inventory Change Group, Pearson, and Sage have all suffered, however none greater than RELX.
FTSE 100 falling star
It’s not the primary time AI has posed a risk. RELX shares briefly dipped after ChatGPT emerged to spark the primary wave of AI panic. However the board argued AI was extra alternative than risk, because it embedded the tech into its merchandise. I used to be tempted however detered by what I believed was a heady price-to-earnings (P/E) ratio of 27. I waited to see how AI mania performed out, then kicked myself because the shares powered larger and the P/E sailed previous 30. I’m not kicking myself right now because the P/E slumps to round 16.
I’m at all times ready for alternatives like these. I’ve populated my SIPP by concentrating on FTSE 100 companies which have fallen out of favour, giving me a decrease entry value and infrequently a greater yield. However a falling share value alone isn’t sufficient. If the enterprise has simply been shot down, it may fall quite a bit additional. So has it?
On the face of it, no. Outcomes stay stable. Yesterday (12 February), the board reported 9% underlying working revenue development for 2025 and guided in direction of sturdy income and earnings development in 2026. Administration can be pushing again arduous on the AI narrative. CEO Erik Engstrom insists AI will likely be “a key driver of customer value and growth in our business for many years to come”.
A very binary inventory
So what are we right here? A basic overreaction, with a confirmed, resilient enterprise marked down on hypothesis? Or is AI an existential risk? We simply don’t know. That makes this near a binary wager.
RELX serves long-standing skilled clients who depend on trusted, curated information and analytics. In contrast, AI has well-documented flaws. Can a chatbot actually substitute that in a single day? Personally, I verify each ‘fact’ it throws at me.
The board appears assured too, profiting from right now’s cheaper price to hike its share buyback from £1.5bn to £2.25bn. Buyers are warming up, with the shares bouncing greater than 8% right now. However I count on sentiment to be extremely unstable. What if AI does turn into a critical risk? Or what if it doesn’t – however the market retains worrying that it would?
A high-quality enterprise on half value doesn’t come alongside usually. RELX is price properly contemplating for many who perceive and settle for the dangers. It’s firmly again on my radar. I’m simply undecided I’m courageous sufficient to drag the set off.
