Text: AI revolution – a threat or an opportunity? (downgraded to HOLD)

We have downgraded our rating on Text to HOLD (from Buy) and cut our price target (PT) to PLN 67.0/share, from PLN 121/share, implying 13% upside potential. In this report, we do not answer the question above; rather, we analyse Text’s chatbot offer vs. the competition, coming to the conclusion that it lags in terms of quality vs. the market leaders, but might still be a successful alternative, given that it is attractively priced (due partially to the utilisation of its own AI engine). In order to explore our concerns, we assume a stabilisation scenario for Text’s results in the mid-term (next three years’ sales and EBITDA CAGRs at 3% and 4%), but this should not stop Text’s attractive dividend yields (c.11%). Despite the yields and the relatively attractive valuation compared to its historical levels, Text remains relatively low in our pecking order – in terms of the growth names in our TMT coverage, we prefer cyber_Folks (BUY, PT PLN 177.2), Wirtualna Polska (BUY, PT PLN 133.2) and Grupa Pracuj (BUY, PT PLN 66.8); while, for dividend yields, we prefer telecoms: Magyar Telekom (BUY, PT HUF 1,432) and OTE (BUY, PT EUR 20.3). For us, Text is a dividend play, with some exposure to the AI revolution, which might end up also being the biggest risk for the story.