On Friday, Deutsche Bank maintained a Buy rating on The Blackstone Group (NYSE:BX) shares and increased its price target to $142 from $140. The adjustment reflects a valuation method that takes into account various earnings components and potential market risks.
The bank's valuation of Blackstone is based on a sum-of-the-parts approach, which includes a multiple of 22.5 times fee-related earnings (FRE). Additionally, it applies a price-to-earnings to growth ratio of 1.1x on the expected annual FRE growth over the next three years.
The assessment also considers carried interest earnings, valuing carry funds and dry powder over a five-year horizon at 2.0x multiple on invested capital (MOIC), and a book value (BV) multiple of 1.0x.
While the outlook for Blackstone remains positive, Deutsche Bank also noted potential downside risks that could impact the company's performance. Among these risks are a significant slowdown in fundraising activities over an extended period, a downturn in the US or global economy, and a prolonged equity market correction.
Other factors that could pose challenges include an unexpected rise in interest rates, a notable drop in US real estate values, lower-than-expected fee-related performance fees, increased tax rates, and any adverse regulatory changes that might hinder Blackstone's business momentum.
The bank's analysis suggests that while Blackstone is positioned for growth, investors should be aware of the broader economic and regulatory environment that could affect the firm's performance.
InvestingPro Insights
InvestingPro data shows that The Blackstone Group (NYSE:BX) currently holds a market capitalization of $147.83 billion and is trading at a P/E ratio of 68.65 based on last twelve months as of Q4 2023. Despite the market's recognition of Blackstone's profitability, reflected in its high Price / Book multiple of 21.69, the company has experienced a revenue decline of 4.14% over the same period. However, Blackstone has maintained a strong gross profit margin at 93.13% and offers a dividend yield of 2.98%, with a history of dividend payments for 18 consecutive years.
Among the InvestingPro Tips, it's highlighted that Blackstone is expected to grow its net income this year, and analysts predict the company will be profitable. Moreover, Blackstone has shown a high return over the last year, with a 60.05% one-year price total return, signaling strong investor confidence. For those looking to delve deeper into Blackstone's performance and future outlook, InvestingPro offers additional tips and analysis, including a total of 8 more tips available on the platform.
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