2 Stocks with Moat Rating Changes This Month

, which reflect a company’s durable competitive advantages, are at the heart of Morningstar’s stock-picking methodology. Companies with competitive advantages seen as lasting at least 20 years are assigned wide moats. Those seen as able to fend off competition for 10–20 years receive narrow moats. Companies that analysts do not believe possess significant competitive advantages are not assigned moats. When combined with low valuations, stocks with moats have historically had a greater chance of outperforming over the long term.

Since moats have a multi-decade focus, these ratings are not often reassigned. But changes within a company or its competitive landscape can lead Morningstar’s equity analysts to adjust ratings. According to Allen Good, who heads Morningstar’s moat rating committee, “We take a long-term perspective when assigning moat ratings, so they are unlikely to change frequently. News events may create volatility in share prices, but that does not mean a company’s competitive position has changed meaningfully. However, analysts are continually testing their assumptions and evaluating a company’s advantages. When an analyst determines something fundamental has changed to impact a company’s longer-term outlook, a moat rating change may be necessary.”

Once a month, we screen US-listed stocks covered by Morningstar analysts for any changes in moat ratings. Since June 10, of the 884 stocks on the list, two companies saw changes in their moat ratings. One stock was upgraded, and one was downgraded.

Economic Moat Ratings Across Morningstar’s US Coverage

Following this month’s changes, of the 884 US-listed stocks covered by Morningstar, 215 have wide moats, 373 have narrow moats, and 296 have no moat. On a percentage basis, 33% of the stocks have no moat, 42% have narrow moats, and 24% have wide moats.

How Economic Moat Ratings Work

Morningstar’s economic moat rating is a key element in evaluating a company’s long-term competitive advantage and its ability to generate excess returns on capital over many years. Morningstar equity analysts determine a company’s economic moat by examining how well it can maintain or grow its market position. A moat helps protect a company’s profits from rivals. Some businesses are better equipped to preserve these advantages over time, while others operate in more competitive or vulnerable industries.

A company with a strong and enduring competitive advantage can often command better pricing, retain loyal customers, and operate more efficiently. These qualities support long-term value creation, which is especially important when evaluating a stock’s potential for superior long-term returns.

Morningstar identifies five primary sources that contribute to a company’s economic moat:

• Switching Costs: Barriers that discourage customers from changing providers due to time, expense, or inconvenience.
• Network Effects: The increasing value of a product or service as more people use it, reinforcing its dominance.
• Intangible Assets: Patents, regulatory licenses, and brand recognition that give a company a distinct edge.
• Cost Advantage: The ability to deliver goods or services at a lower cost than competitors, leading to greater margins or price competitiveness.
• Efficient Scale: Operating in markets with limited competition due to natural or structural constraints.

Here’s a closer look at the stocks with moat rating changes this month, along with our analysts’ commentary.

JD.com JD

• Morningstar Rating
  : ★★★★
• Sector
  : Consumer Cyclical
• Industry
  : Internet Retail

We think JD has a narrow economic moat, based on an intangible asset of high reliability and assurance (on-hand inventory, product authenticity, and fast proprietary logistics services) and a cost advantage resulting from economies of scale in its first-party business. We downgraded JD’s moat to narrow from wide because intensifying competition from on-demand delivery and content-driven e-commerce no longer gives us confidence that JD can maintain excess returns on invested capital over the next 20 years. However, we remain confident it will do so over at least the next 10 years.

JD’s intangible asset is derived from its fast, efficient, and high-quality proprietary logistics, complemented by the assurance of authentic products on its first-party platform. By procuring inventory directly from manufacturers and authorised brand distributors and placing it in warehouses closest to likely end consumers, JD can fulfill most of its first-party orders on the same or next day across almost all districts and counties in China. This model is fundamentally different from marketplace peers such as Alibaba, PDD, and Douyin that mainly rely on third-party sellers and third-party logistics providers.

SoFi SOFI

• Morningstar Rating
  : ★★★
• Sector
  : Financial Services
• Industry
  : Credit Services

In our view, SoFi has a narrow economic moat, reflecting our belief that it has durable competitive advantages that will enable it to earn returns on equity in excess of its cost of equity. The company enjoys a meaningful cost advantage thanks to its fully digital banking model— which allows it to avoid the costs of maintaining a physical branch network—and a high-quality deposit base. Additionally, unlike other digital banks, which typically focus on a limited number of loan categories, SoFi operates as a one-stop shop for its users’ financial needs and is steadily expanding its array of financial products. This significantly increases the firm’s ability to build switching costs into its business model relative to its closest peers.

We typically see cost advantages for banks stemming from at least one of three primary factors: excellent operating efficiency, a low-cost deposit base, or superior underwriting. Digital banks typically enjoy leaner cost structures than traditional banks, as they avoid the costs associated with expansive branch networks. However, SoFi is still a growth-stage company and is investing aggressively in its business, with marketing and product development spending at about 30% and 18% of revenue, respectively, in 2025. As a result, the firm’s operating margin and efficiency ratio remain worse than those of most of its banking rivals. However, as the firm has grown, it has seen steady operating margin expansion as it gains scale on its fixed costs and investment spending grows more slowly than revenue, which we expect to continue. Additionally, while we expect SoFi’s heavy marketing spending to decelerate over time, its strategy has been justified by the consistent returns the bank has seen on those dollars.

Read More on Moat Ratings and Morningstar’s Stock Investing Methodology

• Read Morningstar’s Guide to Stock Investing to inform your stock-picking process.
• Use the Morningstar Investor Screener to build a shortlist of financial services stocks to research and watch.
• Find more info on the economic moat rating here.
• Here’s how to measure a company’s economic advantage.
• Read our list of wide-moat stocks.
• Learn about stocks with moats that Morningstar analysts think are cheap.
• The best of both worlds: undervalued wide-moat stocks.