On Tuesday, UBS adjusted its stance on The Blackstone Group (NYSE:BX), downgrading the stock from Buy to Neutral and revising the price target downward to $135 from $140.
The revision reflects a cautious outlook on the company's growth prospects, as indicated by a statement from the firm. UBS anticipates a slower recovery for Blackstone in several key performance metrics and a modest forecast for growth in the coming years.
The firm's analysis suggests that the recovery in performance, net subscriptions, and fee-related performance revenues (FRPRs) within Blackstone's perpetual real estate strategies will be extended, not reaching their 2022 levels until 2026. The firm also expects only a modest contribution to these metrics in the following year. This prolonged recovery timeline has influenced the decision to lower the price target for Blackstone's shares.
Despite the tempered expectations for certain aspects of Blackstone's business, UBS forecasts continued growth in the firm's drawdown and insurance assets under management (AUM), which is expected to increase by 11% across the firm. However, fee-related earnings (FRE) growth is predicted to be more modest, with an anticipated 15% increase through 2025.
The analysis also notes that Blackstone is likely to experience growth in the wealth management (WM) channel, particularly with the addition of Blackstone Private Equity (BXPE). This expansion is expected to contribute to stronger growth in FRPRs and FRE once the real estate performance rebounds.
In summary, while UBS foresees certain areas of growth for Blackstone, the overall outlook has led to a neutral position on the stock with a slightly reduced price target. The firm's expectations for Blackstone's performance and growth are cautiously optimistic, with specific areas identified for potential improvement in the longer term.
InvestingPro Insights
As investors weigh UBS's recent downgrade and price target adjustment for The Blackstone Group (NYSE:BX), current data from InvestingPro provides additional context. The company's market capitalization stands robust at $153.72 billion, reflecting its significant presence in the industry. Despite a challenging revenue growth environment, with a reported decrease of 4.14% over the last twelve months as of Q4 2023, Blackstone has maintained a high gross profit margin of 93.13%, indicating strong operational efficiency.
InvestingPro Tips highlight that Blackstone is expected to see net income growth this year, which could signal potential for recovery despite UBS's cautious stance. The company has also been consistent in returning value to shareholders, maintaining dividend payments for 18 consecutive years, with a current dividend yield of 2.87%. Additionally, Blackstone's performance has rewarded investors with a high return over the past year, as evidenced by a 54.24% one-year price total return.
Investors looking to delve deeper into Blackstone's financials and future prospects can find additional InvestingPro Tips by visiting https://www.investing.com/pro/BX. For those considering an InvestingPro subscription, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 10 more InvestingPro Tips available that can offer further insights into Blackstone's investment potential.
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