On Tuesday, Evercore ISI adjusted its price target for BlackRock, Inc. (NYSE: NYSE:BLK), increasing it to $1,180 from the previous $1,160. This revision comes in light of BlackRock's recent announcement to acquire HPS Investment Partners, a move aimed at enhancing its offerings in private credit.
The Outperform rating on the stock has been maintained. Currently trading at $1,039, BlackRock shares are near their 52-week high of $1,068.34, reflecting strong momentum with a 32.87% return over the past six months. According to InvestingPro analysis, the stock is currently trading slightly above its Fair Value.
The acquisition of HPS Investment Partners, which was secured for $12 billion in stock, is set to expand BlackRock's private credit portfolio significantly. HPS brings to the table approximately $107 billion in fee-paying assets under management (FPAUM), which includes a variety of investment types such as senior and junior debt, preferreds, and liquid, asset-based, as well as energy/power and real estate assets.
Notably, 85% of these are in private credit, with the remaining 15% in public credit. With a market capitalization of $161 billion and a solid financial health score of "GOOD" from InvestingPro, BlackRock demonstrates strong fundamentals to support this strategic expansion.
As a result of this deal, BlackRock is poised to become one of the top five private debt franchises, boasting pro-forma assets under management (AUM) of $240 billion. Moreover, the transaction will increase BlackRock's total private market assets to $410 billion. The acquisition is expected to be slightly accretive to BlackRock's earnings per share (EPS) by the year 2026, despite the substantial cost of the deal.
The firm acknowledges the acquisition's high cost in the current market but emphasizes the quality of the HPS franchise and its potential within a large and growing total addressable market (TAM), which is supported by secular tailwinds. While there is some risk associated with executing the integration, the firm believes that investors will appreciate the expansion of BlackRock's alternatives footprint.
In other recent news, BlackRock has announced the acquisition of HPS Investment Partners, a global credit investment manager, in a $12 billion all-stock deal. This strategic move is expected to expand BlackRock's private credit capabilities and increase its private markets fee-paying assets under management (AUM). The deal is fully paid through BlackRock equity, specifically 12.1 million SubCo Units, issued by a wholly-owned subsidiary of BlackRock.
The merger is set to create a combined private credit franchise with approximately $220 billion in client assets. BlackRock anticipates that the private debt market will grow to $4.5 trillion by 2030. The new private financing solutions business unit resulting from the merger will be led by Scott Kapnick, Scot French, and Michael Patterson of HPS.
In addition to the merger, BlackRock has also seen a significant increase in its stock price targets by several prominent financial institutions. Citi has raised BlackRock's price target to $1,150, Deutsche Bank (ETR:DBKGn) to $1,105, and Goldman Sachs to $1,118, all maintaining a Buy rating on the stock.
These upgrades come in light of BlackRock's strong Q3 results, with record-breaking net inflows of $221 billion, a 15% year-over-year increase in quarterly revenue to $5.2 billion, and a 26% rise in operating income to $2.1 billion.
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