On Friday, Deutsche Bank adjusted its price target for The Blackstone Group (NYSE: NYSE:BX) shares, reducing it to $138 from $142, while reaffirming a Buy rating on the stock.
The firm's analyst cited a broadly positive first quarter that aligned with expectations but noted several emerging tailwinds that could drive over 20% growth in fee-related earnings (FRE) for Blackstone in 2024 and through 2026 on an average annual basis.
Despite lighter fundraising compared to consensus and forecasts, Blackstone's FRE margins outperformed expectations. Additionally, the Blackstone Real Estate Income Trust (BREIT) resumed generating performance fees, contributing $30 million in fee-related performance fees in the first quarter. This marks a recovery from previous clawbacks and sets a positive stage for the second quarter with no carryover deficits.
Management highlighted three significant factors that are expected to propel Blackstone's business in the near and long term. These include a robust transaction environment, growing demand for private credit from investors and borrowers alike, and a resurgence in the private wealth sector. Blackstone anticipates a more active year ahead, especially in real estate investments, where valuations are becoming more attractive.
The broader market outlook remains cautiously optimistic, with signs of a strong economy beginning to slow and inflation trends showing moderation. Blackstone's approximately $80 billion in assets not yet accruing management fees, along with anticipated activations throughout 2024 and into 2025, are projected to underpin low 20% growth in FRE for the next year and over a three-year compound annual growth rate (CAGR).
In light of these developments, Deutsche Bank slightly lowered its FRE growth estimates, resulting in a reduced three-year FRE CAGR forecast to 21.8% from 22.5%. Despite the adjustment, this growth rate is still considered robust and is second only to Deutsche Bank's forecast for KKR's growth rate, anticipated at 22.6%. The revised price target reflects these updated growth projections.
InvestingPro Insights
With Blackstone Group's (NYSE: BX) recent performance and future outlook in focus, real-time data from InvestingPro provides additional insights into the company's financial health and market position. According to the latest metrics, Blackstone boasts a robust market capitalization of $141.16 billion and a high Price/Earnings (P/E) ratio of 43.83, indicating investor confidence in its earnings potential. The adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 39.27, reflecting a slight moderation in valuation.
InvestingPro Tips highlight that Blackstone's net income is expected to grow this year, complementing the positive outlook shared by Deutsche Bank. However, it's noteworthy that 10 analysts have recently revised their earnings estimates downwards for the upcoming period, which could suggest a more cautious view of future earnings. Despite this, Blackstone has maintained a consistent dividend payment for 18 consecutive years, with a current dividend yield of 3.12%, underscoring its commitment to shareholder returns. Additionally, the company has experienced a significant price uptick over the last six months, with a 29.8% return, potentially signaling strong investor sentiment.
For readers looking to delve deeper into Blackstone's financials and gain further InvestingPro Tips, they can explore more at https://www.investing.com/pro/BX. There are additional tips available on InvestingPro, and users can take advantage of an exclusive offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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