By Sam Boughedda
Credit Suisse analysts downgraded shares of Blackstone (NYSE:BX) to Underperform from Neutral, reducing the firm's price target on the stock to $67.50 from $85.50 in a research note Tuesday.
The analysts said the firm has also reduced its 2023/24 Distributable Earnings (DE) per share estimates, while they are also now the lone negative rating on the "Street."
They explained that the firm's downgrade thesis is based on various factors, including a decelerating retail platform contribution, slowing overall and retail platform FRE contribution, FactSet Consensus' 23-24 DE estimates being 5% to 12%+ too high, and Credit Suisse seeing room for "additional absolute/relative Price-to-DE (P/DE) multiple compression."
"We believe BX's retail product platform momentum is rapidly decelerating, with flagship BREIT now in net third party redemptions, with mixed lead indicators while BCRED is also slowing. Putting BREIT in historical context to other flagship funds (that previously dominated the Retail channel at-large), would signal further tactical flow headwinds. Rising competition may erode the firm's heretofore dominant first mover advantage as new products launch over time, the result of which is likely to slow economic contribution, even as we contemplate still very early days thematically for the industry to gain share in the Retail Alternatives democratization opportunity," wrote the analysts.
"We see FRE growth decelerating, and likely deeper than modeled by the 'Street.' If our model is correct Retail product contribution, a significant driver over the past several years to overall FRE, is likely to slow while BX is likely to generate lower FRPR, all of which may pressure overall FRE growth. Indeed, we now project FRE to grow at a relatively modest ~11% 3-year CAGR through '24," they added. "FactSet Consensus DE estimates are ~5% too high for '23 and ~12%+ too aggressive in '24, notwithstanding a decisive upturn in monetization, the latter broadly facing decelerating trends versus elevated 2020-2021 market dynamics."
Blackstone shares are down 2.8%, trading around the $87.33 mark at the time of writing.