HSBC raises KKR stock rating to Buy, lowers price target to $119

On Tuesday, HSBC analyst Vikram Gandhi upgraded KKR & Co. Inc. (NYSE:KKR) stock from Hold to Buy, while reducing the price target to $119 from the previous $170. The adjustment reflects a new valuation approach, considering the current market conditions and the performance of KKR’s stock.

Gandhi’s assessment is based on a price-to-earnings (PE) methodology, applying a target multiple of 18.3x to the forecasted 2026 earnings per share (EPS) of $6.49. This represents a change from the prior multiple of 24.7x applied to an estimated EPS of $6.87. The revised price target suggests a potential upside of approximately 17%. Currently trading at a P/E ratio of 29.88x, InvestingPro analysis suggests KKR is slightly overvalued compared to its Fair Value, with analyst targets ranging from $114 to $194.

The upgrade to a Buy rating comes after a significant decline in KKR’s share price, which Gandhi believes now presents a more attractive risk-reward balance. HSBC’s analysis indicates that the current market consensus PE for 2026 does not warrant a premium for KKR, setting it equal to the S&P 500’s multiple of 18.3x, a shift from the 25% premium previously assigned.

Gandhi points out that the broader economic uncertainty, the capital-intensive nature of KKR’s business, and the anticipated moderation in fee-related earnings before interest, taxes, depreciation, and amortization (FRE) and fee-paying assets under management (FPAUM) growth from 2024 to 2027 have influenced the decision to remove the premium.

The forecast also takes into account that approximately 22% of KKR’s fee revenues through 2025-2027 are expected to be either capital markets-driven or performance-driven. These factors are considered when determining the premium attached to KKR’s market multiple in comparison to the broader market.

In other recent news, KKR has been actively involved in several significant developments. The firm is nearing the completion of a $2.7 billion deal to acquire Karo Healthcare, a Swedish consumer-health business. This acquisition is in its final stages, with KKR finalizing terms with the current owner, EQT AB (ST:EQTAB). Meanwhile, KKR has stepped back from a potential takeover of Gerresheimer AG (BS:GXId), a German company, leaving Warburg Pincus to pursue the deal independently.

KKR is also in advanced talks to sell its Spanish real estate management firm, Hipoges Iberia SL, to Pollen Street Group Ltd., with other potential buyers like J.C. Flowers & Co. and Arrow Global Group Ltd. still in the mix. Additionally, KKR has been chosen by Thames Water to lead its recapitalization efforts, although the final agreement is subject to due diligence and regulatory approvals. In the Middle East, KKR has expanded its operations by appointing General David Petraeus as Chairman of KKR Middle East and establishing a regional investment team. These developments highlight KKR’s strategic moves across various sectors and regions.

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