Moody's Corporation
MCO
$485.07
+0.29%
Moody's Corporation operates a two-segment financial information franchise: Moody's Investors Service (MIS), one of the two dominant global credit rating agencies alongside S&P Global, which rates corporate, structured finance, financial institution, and public finance debt, and Moody's Analytics, which sells decision solutions, research, data, and risk-modeling software to financial institutions. Its position is best characterized as a wide-moat oligopoly participant — a duopoly-like ratings business with regulatory recognition, issuer-pays economics, and pricing power, complemented by a recurring-revenue analytics arm that is increasingly the growth and diversification engine. The current investor debate centers on the durability of the ratings franchise in an environment where AI-driven disruption fears have pressured the entire financial-data complex (notably S&P Global, which has traded sharply lower on those concerns), against a backdrop of resilient bond issuance that drove 15.1% year-over-year revenue growth in the June 2026 quarter and record quarterly EPS of $5.03. Bulls point to accelerating issuance, expanding margins, and aggressive buybacks ($1.55 billion repurchased in Q2 alone), while bears question whether AI commoditizes credit research and whether the stock's premium multiple can hold if issuance normalizes.…
MCO
Moody's Corporation
$485.07
Related headlines
MCO 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Moody's Corporation's 12-month outlook, with a consensus price target around $551.38 and implied upside of +13.7% versus the current price.
Average Target
$551.38
0 analysts
Implied Upside
+13.7%
vs. current price
Analyst Count
—
covering this stock
Price Range
$470 - $600
Analyst target range
Coverage is broad and constructive: 21 analysts follow Moody's with a consensus recommendation of "buy" (mean rating 1.71 on a 1-5 scale) and an average target price of $555.43, implying roughly 14.5% upside from the current $485.07. The consensus leans bullish, supported by a cluster of Overweight/Outperform ratings from Wells Fargo, Baird, JP Morgan, and Barclays through July 2026, with only Mizuho (Neutral), Morgan Stanley (Equal Weight), and BMO (Market Perform) sitting on the sidelines. Consensus estimates of $27.18 average EPS and $10.54 billion average revenue for the forward period underpin the targets and align with the 25.7x forward multiple.
The target range of $470 to $610 is wide — a 30% spread from low to high — signaling meaningful disagreement about the durability of the issuance cycle and AI risk. The $610 high target implies multiple expansion toward the mid-30s forward PE plus confidence that ratings volumes and analytics pricing hold, while the $470 low sits essentially at the current price and prices in margin compression or an issuance slowdown. Notably, the institutional ratings flow shows no downgrades — all ten actions since April 2026 were reiterations — but also no upgrades, indicating stable conviction rather than rising enthusiasm; the wide spread and unchanged ratings suggest the stock's next move will be driven by the Q3 print and issuance data rather than analyst revisions.
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Bulls vs Bears: MCO Investment Factors
The bull case currently holds the stronger evidence: revenue is accelerating at 15.1% YoY, gross margins expanded roughly 860 basis points year over year to 76.29%, EPS hit a record $5.03, and 21 analysts average a $555.43 target with no downgrades since April 2026. The bear case rests less on fundamentals than on price — a 37.2x trailing PE, 11.85x sales and 24.5x EV/EBITDA already discount a lot, and the stock's -12.01% one-year relative strength shows the market has been unwilling to pay up. The single most important tension is whether the current issuance cycle is structural or cyclical: if bond issuance holds near current levels, operating leverage keeps EPS compounding into the 25.7x forward multiple and the stock re-rates toward $555; if issuance normalizes, the highest-margin MIS revenue line compresses at the same moment the AI-disruption narrative is already de-rating the financial-data complex. Everything else — buybacks, analytics mix, balance sheet — is secondary to that one variable.
Bullish
- Revenue accelerating at 15.1% YoY: Q2 2026 revenue of $2.185 billion rose 15.12% from $1.898 billion a year earlier, extending a multi-quarter uptrend from $1.924B (Q1 2025) through $2.079B (Q1 2026). This is acceleration, not deceleration, and it directly contradicts the bear case that issuance is rolling over.
- Margins expanding sharply on operating leverage: Gross margin jumped to 76.29% in Q2 2026 from 67.65% a year earlier, and operating margin rose to 47.87% from 44.42%, producing record quarterly EPS of $5.03 versus $3.22. EBITDA margin of 45.26% on a largely fixed cost base means incremental issuance revenue drops through at very high incremental margins.
- Analyst consensus buy with 14.5% upside: 21 analysts carry a mean rating of 1.71 (buy) and an average target of $555.43 versus the $485.07 price, implying ~14.5% upside. The $610 high target implies mid-30s forward PE expansion, and no downgrades have occurred since April 2026 — all ten rating actions were reiterations.
- Analytics segment now the larger revenue base: Moody's Analytics contributed $1.284 billion versus MIS's $901 million in the reported period, making recurring subscription revenue the majority of the top line. This structurally dampens the ratings cycle and supports the premium multiple even if issuance normalizes.
Bearish
- Premium multiple leaves no room for error: At 37.2x trailing PE, 11.85x sales, 24.5x EV/EBITDA and 22.6x book, Moody's trades at a steep premium to diversified financials that typically command mid-to-high-teens earnings multiples. The 11.03x EV/sales multiple prices in continued issuance strength and analytics pricing power simultaneously.
- Severe relative underperformance versus market: The stock is up just 3.52% over 12 months versus SPY's 15.53% (relative strength -12.01%), and down 2.79% YTD against an 11.93% market gain (-14.72 points of relative strength). This is persistent de-rating, not a temporary dip, and the shares sit 11% below the $546.88 high.
- AI disruption narrative pressuring the complex: S&P Global has traded down roughly 25% on AI-driven disruption fears and a soft earnings forecast, and Moody's is exposed to the same narrative in its Analytics segment. If AI commoditizes credit research and data delivery, the recurring-revenue moat that justifies the premium multiple is called into question.
- Issuance cyclicality drives earnings volatility: MIS supplies the higher-margin earnings torque, and quarterly EPS has swung from $2.18 (Q4 2024) to $5.03 (Q2 2026) — a 131% range — largely on issuance volumes. A normalization in bond issuance would hit the highest-margin revenue line first and could compress the multiple simultaneously.
MCO Technical Analysis
Moody's is in a choppy, range-bound consolidation rather than a clean trend: the stock is up just 3.52% over the past year versus a 15.53% gain for the S&P 500 (relative strength of -12.01%), and it sits at $485.07, which is roughly 89% of its 52-week range between a $402.28 low and a $546.88 high. That positioning — near the upper third of the range but still about 11% below the high — signals a stock with recovering momentum but unresolved overhead supply, not a breakout leader. Year-to-date the shares are down 2.79% while the market is up 11.93%, a 14.72-point relative-strength deficit that frames the consolidation as a period of underperformance rather than accumulation at highs.
Short-term momentum has turned decisively positive and is diverging from the weak 12-month record: the stock is up 4.25% over the past month (beating SPY's 1.22% by 3.03 points) and 6.53% over six months, but still down 5.05% over three months (7.74 points behind SPY). That pattern — strong 1-month, negative 3-month — indicates a sharp October rebound off the late-September/early-October slide from ~$515 to $441, with the last two sessions alone jumping from $462.77 to $485.07 (+4.8% in two days) on volume of roughly 751,000 shares. The move looks like a mean-reversion rally off oversold conditions rather than confirmation of a new uptrend, and the stock needs to hold above the $470 breakout zone to validate it.
Key levels are well defined: support sits at the $441-$447 area tested in early October, with the 52-week low of $402.28 as the deeper floor, while resistance is the $515-$519 zone (the July/August highs) and then the $546.88 52-week high. A close above $519 would signal a resumption of the primary uptrend and open a path toward the high; a break below $441 would confirm the September downtrend and put the $402 low in play. With a beta of 1.346, Moody's is roughly 35% more volatile than the market, and a max drawdown of -23.61% over the period underscores that position sizing should account for amplified moves in both directions.
Beta
1.35
1.35x market volatility
Max Drawdown
-23.6%
Largest decline past year
52-Week Range
$402-$547
Price range past year
Annual Return
+3.5%
Cumulative gain past year
| Period | MCO Return | S&P 500 |
|---|---|---|
| 1m | +4.2% | +0.2% |
| 3m | -5.0% | +2.9% |
| 6m | +6.5% | +8.4% |
| 1y | +3.5% | +14.9% |
| ytd | -2.8% | +11.9% |
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MCO Fundamental Analysis
Revenue is accelerating, not merely growing: Q2 2026 revenue of $2.185 billion rose 15.12% year over year from $1.898 billion, capping a clear multi-quarter uptrend from $1.924 billion (Q1 2025), $2.007 billion (Q3 2025), $1.889 billion (Q4 2025), and $2.079 billion (Q1 2026). The segment mix shows Moody's Analytics at $1.284 billion and Moody's Investors Service at $901 million in the reported period, meaning the recurring analytics business is now the larger revenue contributor and provides a stabilizer against issuance cyclicality, while MIS supplies the higher-margin, higher-beta earnings torque. The trajectory implies the investment case is shifting from a pure ratings-cycle play toward a diversified data-and-analytics compounder, which supports a premium multiple but also exposes the stock to the same AI-disruption narrative weighing on peers.
Profitability is exceptional and expanding: Q2 2026 net income was $878 million on a 40.18% net margin, with gross margin of 76.29% (up from 67.65% in Q2 2025 and 66.86% in Q4 2025) and an operating margin of 47.87% versus 44.42% a year earlier. EBITDA of $989 million equates to a 45.26% EBITDA margin, and the company's TTM net margin of 31.86% and operating margin of 44.77% are consistent with best-in-class information-services economics. The margin expansion is being driven by operating leverage on surging issuance revenue against a largely fixed cost base, and the 68.15% gross margin reported on a TTM basis still leaves room to run toward the 76% quarterly peak if volumes hold.
Financial health is strong but levered: debt-to-equity stands at 1.81x, the current ratio is 1.74x, and interest coverage of roughly 15.6x comfortably services the debt load, while ROE of 60.66% reflects both high profitability and an equity base shrunk by buybacks. Free cash flow is robust — $3.398 billion TTM, with $874 million generated in Q2 2026 alone against just $95 million of capex — and the company returned capital aggressively via $1.547 billion of Q2 repurchases plus $180 million of dividends, funded from a $3.001 billion cash balance. The FCF yield of roughly 3.7% on the $91.5 billion market cap is modest, but the 1.12x FCF-to-operating-cash-flow conversion and 8.2x capex coverage confirm the business self-funds growth and returns, with the main financial risk being the leverage taken on to sustain buybacks rather than any liquidity constraint.
Quarterly Revenue
$2.2B
2026-06
Revenue YoY Growth
+15.1%
YoY Comparison
Gross Margin
76.3%
Latest Quarter
Free Cash Flow
$3.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is MCO Overvalued?
Because Moody's is solidly profitable (Q2 2026 net income of $878 million), the PE ratio is the appropriate primary metric: the stock trades at 37.21x trailing earnings but only 25.68x forward earnings, a 31% compression that implies the market expects meaningful EPS growth — consistent with consensus 2027 EPS of $27.18 versus the current run-rate. The forward PE of 25.68x against a PEG of 1.75 suggests the growth is being paid for but not extravagantly so, while the 11.85x PS and 24.51x EV/EBITDA multiples confirm the market is pricing Moody's as a high-quality, high-margin franchise rather than a cyclical ratings agency.
Relative to the financial-data and stock-exchange peer group, Moody's trades at a premium: its 37.2x trailing PE and 11.85x sales compare with a sector where diversified financials typically command mid-to-high-teens earnings multiples, and its 22.57x price-to-book is extreme given the buyback-depleted equity base. The premium is defensible on quality grounds — 47.9% operating margins, 60.7% ROE, and a duopoly ratings position are superior to most peers — but the 11.03x EV/sales multiple leaves little room for error if issuance volumes normalize or AI-driven competition compresses pricing in the analytics segment.
Historically, Moody's own valuation band shows the current 37.2x trailing PE is near the upper end of its recent range: the stock traded at 22.5x in Q2 2026, 29.2x in Q1 2026, and 32.9x-38.9x through 2025, with the 22.5x reading reflecting the earnings surge rather than a cheaper stock. The PS ratio of 11.85x is actually below the 36.4x-48.1x readings seen across 2025-2026 (a function of the larger revenue base and market cap recalibration), suggesting the sales multiple has de-rated even as earnings multiples sit high. Net, the market is pricing optimistic issuance and margin expectations, and the stock is not cheap on any absolute measure — the case rests on growth delivery rather than multiple expansion.
PE
37.2x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 23x~52x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
24.5x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the interaction between issuance cyclicality and a levered, buyback-heavy capital structure. Debt-to-equity of 1.81x and a 22.6x price-to-book reflect an equity base deliberately shrunk by repurchases, and ROE of 60.66% is partly a leverage artifact rather than pure profitability. Quarterly EPS has ranged from $2.18 (Q4 2024) to $5.03 (Q2 2026), a 131% swing driven largely by MIS issuance volumes, so earnings are more cyclical than the 31.86% TTM net margin suggests. The company spent $1.547 billion on buybacks in Q2 2026 alone against $874 million of quarterly FCF, meaning capital return exceeded organic cash generation in the quarter and was partly funded from the $3.001 billion cash balance — sustainable while issuance is strong, less so if FCF dips.
Market and competitive risks are dominated by valuation compression and the AI narrative. At 37.2x trailing earnings, 11.85x sales and 24.5x EV/EBITDA, Moody's trades at a premium to diversified financials in the mid-to-high-teens PE range, and its own recent band ran from 22.5x to 38.9x — the current reading sits near the top. Peer S&P Global has fallen roughly 25% on AI disruption fears and a soft forecast, and Moody's Analytics ($1.284 billion of the $2.185 billion quarterly revenue) sells exactly the research and data products most exposed to that thesis. With a beta of 1.346, the stock amplifies market moves by roughly 35%, and its -12.01% one-year relative strength versus SPY shows sector rotation has already been a headwind; a broader de-rating of financial-data multiples would hit MCO regardless of its own execution.
The worst-case scenario is a simultaneous issuance slowdown and AI-driven multiple compression: bond issuance normalizes, MIS revenue and the 76.29% gross margin roll back toward the 66.86% level seen in Q4 2025, forward EPS of $27.18 proves unreachable, and the market re-rates the stock from 37.2x toward the low-30s. That combination would take the shares toward the $441-$447 support tested in early October, and a break there puts the $402.28 52-week low in play — roughly -17% from the current $485.07. The analyst low target of $470 (-3.1%) is a milder version of the same outcome, while the -23.61% max drawdown over the period shows how far a full risk-off move can extend; a repeat of that magnitude from $485 would imply roughly $370.
