On Wednesday, The Blackstone Group (NYSE:BX) stock was downgraded from Overweight to Neutral by Piper Sandler, with a new price target set at $149.00. The adjustment reflects a more cautious outlook on the company's near-term performance, as recent earnings estimates for 2024 and 2025 have been reduced by 9% and 7%, respectively.
The downgrade comes after Blackstone's third-quarter update for 2024 indicated that realized performance revenues are on track to hit their lowest point since the second quarter of 2020. This slowdown in realizations is partly responsible for the adjustment in the company's stock rating.
Despite the downgrade, there is an acknowledgment of potential for improvement in the future. The firm notes the possibility of a significant increase in activity by 2025, driven by pent-up demand. Moreover, Blackstone is still expected to benefit from long-term trends, as retail and insurance sectors are predicted to continue allocating more resources into private assets.
However, the recent surge in Blackstone's stock price, which saw an increase of over 20% in the last three months and over 40% in the past year, suggests that much of the anticipated good news may have already been factored into the current valuation. Piper Sandler posits that with the stock trading at 25 times earnings—higher than its peers, which trade at around 20 times earnings—a Neutral rating is now warranted.
In other recent news, The Blackstone Group has seen several significant developments. Jefferies, a global investment banking firm, has raised Blackstone's stock price target to $168 from $147 following the company's intra-quarter monetization update, which revealed approximately $300 million in earnings.
Despite this figure being 40% below previous estimates, Jefferies maintained its forecast for Blackstone's fee-related earnings at $1.2 billion.
The company has also confirmed plans to invest approximately $13.32 billion in the development of an artificial intelligence data center in northeast England. This investment is expected to strengthen the United Kingdom's position in the technology sector, particularly in artificial intelligence.
Moreover, Blackstone, in collaboration with Vista Equity Partners, has agreed to acquire Smartsheet (NYSE:SMAR), a global collaboration software company, for a total of $8.4 billion. This acquisition is a significant consolidation in the software industry, emphasizing the value seen in productivity-enhancing tools.
In additional news, Blackstone has begun raising its third Asia-focused private equity fund, targeting at least $10 billion. This fund will primarily focus on investments in India, with significant markets such as Japan and Australia also being considered.
In the realm of analyst notes, TD Cowen has maintained a Hold rating on Blackstone shares after the company released its intra-quarter realization update. Finally, French President Emmanuel Macron recently met with top U.S. financiers, including Blackstone CEO Stephen Schwarzman, to discuss France's fiscal situation and potential tax increases.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Piper Sandler's downgrade of Blackstone. Despite the downgrade, Blackstone's financial metrics reveal a mixed picture. The company's revenue growth stands at an impressive 48.12% over the last twelve months as of Q2 2024, showcasing strong top-line performance. However, this is tempered by a quarterly revenue decline of 2.56% in Q2 2024, aligning with Piper Sandler's concerns about near-term performance.
Blackstone's P/E ratio of 54.32 supports Piper Sandler's observation that the stock is trading at a premium compared to its peers. This high valuation is further emphasized by the company's Price to Book ratio of 26.71, indicating investors are paying a significant premium for Blackstone's assets.
InvestingPro Tips highlight that Blackstone has maintained dividend payments for 18 consecutive years, which may appeal to income-focused investors despite the recent downgrade. Additionally, the stock has shown strong returns over the last three months, corroborating the 20% increase mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Blackstone, providing a deeper understanding of the company's financial health and market position.
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