Jefferies initiates Blue Owl Capital with Buy, $16 price target

On Friday, Jefferies began coverage on Blue Owl Capital Corp. (NYSE:OBDC) with a Buy rating and a price target of $16.00, adding to the broader analyst consensus that sees potential upside from the current price of $13.09. According to InvestingPro data, analyst targets range from $14.50 to $17.00, suggesting significant upside potential. The firm's analyst highlighted the strength of OBDC's portfolio, which is focused on upper-middle-market borrowers and sponsor-backed deals, as a key factor in its ability to outperform in the current market environment characterized by wide credit spreads and cautious investor sentiment.

The analyst pointed out that Blue Owl Capital's portfolio is defensively constructed and has minimal exposure to sectors that are typically more volatile or sensitive to economic downturns, such as tariffs, China, or the auto industry. Instead, the portfolio is concentrated in areas such as healthcare, essential software, insurance brokers, and business services, which are considered non-cyclical and more resilient. This defensive positioning appears to be paying off, as InvestingPro data shows the company maintains a healthy current ratio of 1.49x and has received a "GOOD" overall financial health rating.

Jefferies believes that the current 15% discount to Net Asset Value (NAV) and 12% discount to peers on a Price/NAV basis does not reflect the true value of OBDC's portfolio. The firm expects the valuation to rebound as the market begins to recognize the non-cyclical focus and conservative nature of the portfolio. Supporting this view, InvestingPro data reveals that OBDC trades at an attractive P/E ratio of 8.56x while offering a substantial dividend yield of 12.91%, having raised its dividend for three consecutive years.

The analyst also noted that Blue Owl Capital's rigorous underwriting process has led to solid credit performance throughout the credit cycle. This has resulted in peer-leading cumulative losses, which have been among the lowest since the pandemic began.

Jefferies' positive outlook on OBDC is further reinforced by the belief that the company's portfolio is structured to perform well regardless of economic cycles, which could make it an attractive investment for those seeking stability in uncertain times. With a market capitalization of $6.69 billion and a beta of 0.78, the company demonstrates lower volatility compared to the broader market. For a deeper understanding of OBDC's investment potential, investors can access comprehensive analysis and additional ProTips through InvestingPro's detailed research reports.

In other recent news, JMP Securities raised its price target for Blue Owl Capital Corp. to $17.00 from the previous $16.50, while maintaining a Market Outperform rating. This adjustment reflects the firm's positive assessment of Blue Owl Capital's performance in the business development company sector. Analysts at JMP Securities have expressed confidence in the company's robust fundamentals and the competence of its management team, which they have observed closely over the past year and a half. They noted that Blue Owl Capital's strong quarterly results were anticipated, although they believe the market may not fully appreciate the company's solid business foundation. JMP Securities highlighted the advantages of Blue Owl's broader platform and scale, which contribute to its consistent performance. The firm's analysis suggests an expectation of continued growth and success for Blue Owl Capital. These developments indicate a positive outlook from JMP Securities regarding Blue Owl Capital's future trajectory.

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