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Apollo shares retain Outperform rating as Evercore highlights unique alpha generation strategy

EditorAhmed Abdulazez Abdulkadir
Published 06/11/2024, 14:42
APO
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On Wednesday, Evercore ISI updated its financial outlook for Apollo Global Management (NYSE:APO), increasing the investment firm's price target from $150.00 to $174.00. The firm maintained an Outperform rating for Apollo's shares, signaling a positive expectation for the company's performance.

In a statement, Evercore ISI highlighted Apollo's unique approach to asset management, emphasizing the company's ability to generate alpha – returns above benchmarks – which is considered by the firm as Apollo's "secret sauce." This capability is expected to contribute to Apollo's projected growth, including a 20% annual increase in fee-related earnings (FRE), a 10% growth in shareholder-related earnings (SRE), and $15 per share of after-tax net income (ANI) over the next five years.

Apollo's growth strategy is built around four major investment themes. These include an industrial renaissance with a focus on energy transition and digital infrastructure; expansion in the retirement market through products like retirement income life insurance (RILA) and stable value strategies; tapping into individual investors who hold wealth comparable to institutions but have lower allocations; and assisting investors in rethinking their allocations between public and private markets, aiming to optimize their investments across both equity and fixed income.

The firm's strategic vision, as outlined during its investor day, also forecasts a substantial $21 billion in capital generation over the same period. Apollo's approach is designed to cater to the evolving needs of investors as they adjust their portfolios to balance alpha and beta – the measures of active and passive investment returns – in an increasingly complex financial landscape.

Evercore ISI's revised price target reflects confidence in Apollo Global Management's strategic initiatives and its potential for robust financial growth and value creation for its shareholders.

In other recent news, Apollo Global Management has been the subject of positive attention from Deutsche Bank (ETR:DBKGn) and Citi following a robust third quarter. Deutsche Bank maintained a Buy rating on Apollo Global Management and raised its price target from $141.00 to $155.00, highlighting solid Fee-Related Earnings (FRE) results and strong key performance indicators.

Concurrently, Citi maintained its Buy rating on the company and increased the price target to $170 from the previous $162, influenced by the strong performance in Apollo's Strategic Real Estate (SRE) segment.

Apollo's third quarter was marked by record FRE of $531 million and robust spread-related earnings (SRE) of $856 million, resulting in an adjusted net income of $1.1 billion. The company's fundraising and deployment activities were robust, with record $62 billion in originations for the quarter. The company's portfolio now has a greater focus on AAA-rated investments, which accounted for approximately 80% of the alternatives book post-adjustments.

These recent developments suggest a continued positive trajectory for Apollo Global Management. The company aims for both FRE and SRE to reach $10 billion by 2029, with adjusted net income doubling to $15 per share. Apollo's focus on expansion opportunities in retirement services and Principal Warranty and Collateral (PWC), coupled with a distinguished origination platform, further underscores this growth potential.

InvestingPro Insights

Apollo Global Management's strong performance and strategic vision, as highlighted by Evercore ISI, are further supported by recent data and insights from InvestingPro. The company's market capitalization stands at an impressive $84.46 billion, reflecting its significant presence in the financial services industry.

InvestingPro data reveals that Apollo's revenue growth has been remarkable, with a 285.13% increase in the most recent quarter. This aligns with Evercore's projection of substantial growth in fee-related earnings and shareholder-related earnings. Additionally, Apollo's P/E ratio of 14.79 suggests that the stock may be undervalued relative to its earnings potential, especially considering the company's growth prospects.

InvestingPro Tips indicate that Apollo is trading at a low P/E ratio relative to its near-term earnings growth, which supports Evercore's optimistic outlook. The company has also demonstrated a high return over the last year, with a price total return of 82.58% over the past 12 months, indicating strong market performance.

It's worth noting that Apollo has maintained dividend payments for 14 consecutive years, showcasing its commitment to shareholder returns. This, combined with its strong financial position—liquid assets exceeding short-term obligations—reinforces the company's stability and growth potential.

For investors seeking more comprehensive analysis, InvestingPro offers 15 additional tips for Apollo Global Management, providing deeper insights into the company's financial health and market position.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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