On Friday, Evercore ISI increased the price target for StepStone Group (NASDAQ:STEP) to $41.00, up from the previous target of $38.00, while keeping an Outperform rating on the company's shares. The adjustment follows StepStone's reported adjusted after-tax net income (ANI) of $0.33, surpassing both the analyst's and the Street's estimates of $0.29.
This outperformance was attributed to higher-than-expected management fees, which contributed to a stronger fee-related earnings (FRE).
The firm observed that StepStone had a robust quarter for fee-paying assets under management (FPAUM) subscriptions, with over $5 billion in the fourth quarter, an increase from the $3 billion in the previous quarter and well above the forecasted $3.8 billion.
Notably, the evergreen funds secured $0.6 billion in subscriptions, doubling the performance of the last quarter and marking their best quarter in that channel, which pushed their assets under management (AUM) to $3.4 billion, a 36% rise quarter over quarter.
Additionally, the company's private wealth sector was cited as creating a positive impact on the fee rate. Early in the first quarter, StepStone closed another $0.8 billion in venture capital (VC) secondaries, with $3 billion from the VC secondaries pipeline expected to enter fee-earning assets under management (FEAUM) in the same quarter.
The firm also highlighted ongoing commitments in separately managed accounts (SMAs) and a strong pipeline from new and existing clients, particularly in infrastructure and private credit.
StepStone is actively marketing 10 funds, which is an increase from the previous quarter. The company also reported a record high level of dry powder at $22.6 billion. Management reiterated their confidence in at least doubling fee-related earnings over the next five years, with a 20% increase in the first year.
In light of these developments, Evercore ISI has revised its earnings per share (EPS) estimates for fiscal years 2025 and 2026 to $1.71 and $2.20, up from $1.68 and $2.16 respectively. The new price target of $41 represents a $3 increase from the previous target.
InvestingPro Insights
Following the positive outlook from Evercore ISI on StepStone Group (NASDAQ:STEP), current metrics from InvestingPro further bolster the investment case for the company. With a market capitalization of $4.31 billion and a robust revenue growth of 322.63% for the last twelve months as of Q3 2024, StepStone shows a strong financial performance. Additionally, the company has demonstrated a significant price appreciation, with a 6-month price total return of 48.7% and a 1-year price total return of 80.01%, indicating a bullish trend in the market.
Two noteworthy InvestingPro Tips for StepStone include the company's consistent dividend growth, with a 5.0% increase in the last twelve months as of Q3 2024, and the anticipation by analysts for an increase in net income and sales growth in the current year. These factors may signal to investors the potential for steady returns and confidence in the company's growth trajectory. For those looking to delve deeper into StepStone's financials, additional insights are available on InvestingPro, with 5 more tips listed to guide investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to valuable information that can aid in making informed investment choices.
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