UBS sets Buy rating on Brookfield Asset shares, cites growth potential

On Monday, UBS began shares coverage of Brookfield Asset Management Inc (NYSE:BAM/A:CN) (NYSE: BAM), assigning a Buy rating and establishing a price target of C$92.00.

With a current market capitalization of $87.61 billion and trading near its 52-week high of $59.58, the firm is optimistic about Brookfield's future, highlighting the favorable conditions for large, private asset managers and predicting an upcoming period of accelerated Fee-Related Earnings (FRE) growth.

The growth is expected as fundraising activities increase and capital markets improve. InvestingPro data reveals 12 key investment factors for BAM, including strong recent performance metrics and growth indicators.

The analyst expressed high confidence in Brookfield's ability to meet its five-year goals, suggesting there might even be potential for surpassing their high-teens growth projections. The company's impressive 56.59% return over the past year supports this optimistic outlook.

This potential is attributed to several factors: a predicted 24% compound annual growth rate (CAGR) in fee revenue through fiscal year 2026, the transition of managed insurance assets into higher-fee strategies, and the diversification of fundraising channels to include insurance solutions and private wealth. These strategies could enable Brookfield to generate between $100 billion and $150 billion in capital formation annually.

Trading at a P/E ratio of 51.3x and a price-to-book ratio of 7.54x, UBS believes that Brookfield's growth trajectory will be increasingly recognized as the company continues to expand its credit business and make visible progress towards its operational targets.

According to InvestingPro's Fair Value analysis, the stock shows potential upside from current levels. The firm's outlook is based on the belief that Brookfield Asset Management (TSX:BAM) is well-positioned to capitalize on the growing demand for private asset management and the rebound in capital markets. For detailed insights and access to the comprehensive Pro Research Report covering BAM and 1,400+ other stocks, visit InvestingPro.

In other recent news, Brookfield Asset Management has seen substantial financial growth, with both BMO Capital Markets and RBC Capital Markets raising their price targets for the company.

BMO Capital Markets increased its price target to $50.00, maintaining a Market Perform rating, while RBC Capital Markets raised its target to $68, retaining an Outperform rating on the stock. These adjustments reflect the recognition of Brookfield's positive business fundamentals and its progress in fundraising across various asset classes.

Brookfield's Q3 2024 conference call reported record inflows of $135 billion over the past year, a 23% increase in fee-bearing capital now at $539 billion, and a rise in fee-related earnings by 14% to $644 million. In addition, distributable earnings grew by 9% to $619 million, and the company declared a Q3 dividend of $0.38 per share.

The company's strategic growth was noted in private credit, artificial intelligence infrastructure, and energy transition, particularly in the nuclear sector following the acquisition of Westinghouse.

Furthermore, Brookfield plans to double its business to $1 trillion in fee-bearing capital over the next five years and is transitioning its headquarters to New York. These recent developments highlight Brookfield's robust financial performance and strategic growth initiatives.

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