On Wednesday, CFRA downgraded shares of The Carlyle Group LP (NASDAQ:CG), shifting the investment firm's rating from Hold to Sell while maintaining a price target of $45.00. The downgrade comes despite the company's share price having increased by over 26% since September lows. CFRA's analysis suggests that The Carlyle Group's performance may lag behind its peers in the alternative investment sector as the business is still in a phase of catching up.
The firm's price target is based on a 10.0x price-to-earnings (P/E) ratio on the projected 2025 earnings per share (EPS), which is lower than the three-year historical average P/E ratio of 10.9x. CFRA has kept its distributed earnings estimates stable at $3.80 for 2024 and anticipates an increase to $4.50 in 2025. Revenue forecasts are set at $3.93 billion for 2024, with an increase to $4.45 billion projected for 2025.
The Carlyle Group's third-quarter revenues are expected to be around $959 million. As of June 30, the company reported total assets under management (AUM) of $435 billion, marking a 13.0% year-over-year increase. Fee-earning AUM stood at $307 billion, up by 13.2%, and perpetual capital fee-earning AUM was at $90 billion, largely attributed to the Fortitude unit's $73 billion. The breakdown of AUM across the firm's divisions included $164 billion in Global Private Equity, $190 billion in Global Credit, and $80 billion in Global Investment Solutions.
Looking ahead, The Carlyle Group is optimistic about its activity levels in the second half of 2024, expecting a healthier IPO market that could enhance exit opportunities and interest from strategic buyers. This outlook is set against a backdrop where global IPOs decreased by 24% for the first nine months of 2024, with expectations that momentum may not pick up until late in the year.
In other recent news, The Carlyle Group has been a focal point in recent analyst notes and company developments. The firm reported strong fee-related earnings and a record $435 billion in assets under management during a recent earnings call. Deutsche Bank maintained its Buy rating on Carlyle, expressing confidence in the company's long-term trajectory.
This sentiment was echoed by Redburn-Atlantic, which initiated coverage of Carlyle with a Buy rating, citing robust growth in its credit business and strategic changes in its compensation structure.
TD Cowen, however, maintained its Hold rating on Carlyle, albeit with a slightly raised price target from $41.00 to $42.00, following the company's second-quarter performance.
The Carlyle Group also announced a significant commitment of up to $1 billion to fund commercial property assessed clean energy (C-PACE) loans in a strategic partnership with North Bridge ESG LLC. This move strengthens Carlyle's presence in the environmentally focused real estate finance market.
InvestingPro Insights
The Carlyle Group's recent financial data from InvestingPro provides additional context to CFRA's downgrade. Despite the company's market capitalization of $16.63 billion, its P/E ratio stands at -44.67 for the last twelve months as of Q2 2024, reflecting current profitability challenges. This aligns with CFRA's cautious stance on the company's near-term performance.
However, The Carlyle Group has shown impressive revenue growth, with a 169.42% increase in quarterly revenue as of Q2 2024. This substantial growth could potentially support the company's optimistic outlook for the second half of 2024, as mentioned in the article.
InvestingPro Tips highlight that The Carlyle Group has a high return on invested capital, which could be attractive to value investors looking beyond current earnings. Additionally, the company's stock is trading near its 52-week high, with the current price at 91.54% of the peak, indicating strong recent performance despite the downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 18 additional tips for The Carlyle Group, providing a deeper understanding of the company's financial health and market position.
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