DigitalBridge shares target cut to $24 from $27, retains buy rating at B.Riley

On Tuesday, B.Riley adjusted its outlook on DigitalBridge Group Inc. (NYSE:DBRG), reducing the price target to $24 from the previous $27, while sustaining a Buy rating on the stock. The firm's decision comes after a thorough analysis, which led to a downward revision of the forward distributable earnings per share estimates for DigitalBridge.

The revised price target is based on a sum-of-the-parts analysis, applying a 20x multiple on the anticipated 2025 run-rate fee-related earnings of $165 million and taking into account other balance sheet components. B.Riley maintains its $3.50 per share net present value estimate for carried interest. Despite the lower earnings forecast for the years 2024 to 2026, the firm's in-depth analysis supports a positive outlook on DigitalBridge's shares.

The firm noted that DigitalBridge's share performance, which has seen a 25% decline year-to-date, contrasts with a slight increase in the Russell 2000 Index and represents a favorable buying opportunity. B.Riley anticipates a potential price recovery for DigitalBridge, backed by expected earnings results in the coming quarters.

DigitalBridge management has reiterated most of its guidance, including capital formation, fee-earning equity under management (FEEUM), and fee-related earnings (FRE). B.Riley also expects forthcoming earnings reports to provide a clearer picture of DigitalBridge's business model, which has transitioned from a legacy REIT structure to focus on infrastructure-centric alternative asset management.

Lastly, the firm highlighted the vast total addressable market (TAM) for digital infrastructure, which is estimated to be around $15 trillion according to DigitalBridge's management, underscoring the significant growth potential in this sector.

In other recent news, DigitalBridge Group Inc. has seen a series of revisions in its stock outlook from various firms. Keefe, Bruyette & Woods adjusted the price target to $17.75, maintaining an Outperform rating despite lowering second quarter estimates. The firm anticipates a net growth in fee-earning assets under management (FEEUM) of $4-4.5 billion annually and positive growth of fee-related earnings (FRE).

Truist Securities revised its price target for DigitalBridge to $19.00, maintaining a Buy rating. The adjustment follows DigitalBridge's recent investor day, where the company outlined its strategy to double its FEEUM within the next five years, focusing on the top 100 infrastructure investors.

RBC Capital also adjusted its outlook on DigitalBridge, reducing the price target to $19 while maintaining an Outperform rating. This revision acknowledges a shift in DigitalBridge's financial landscape, including a decline in net internal rate of return (IRR) for certain investment vehicles and a total of $1.1 billion in new capital raised in the first quarter.

Finally, DigitalBridge reported a robust growth in its first quarter earnings, highlighting a 17% increase in FEEUM to $32.5 billion and a 21% surge in fee revenues to $72.8 million. These recent developments reflect DigitalBridge's strategic focus on power solutions for data centers, with over 2 gigawatts under construction and a pipeline exceeding 5 gigawatts.

InvestingPro Insights

B.Riley's recent adjustment of DigitalBridge Group Inc.'s (NYSE:DBRG) price target coincides with notable data points from InvestingPro. DigitalBridge's market capitalization stands at approximately $2.44 billion, reflecting the size and significance of the company in the market. Additionally, the company's P/E ratio, as of the last twelve months leading up to Q1 2024, is 21.76, which may suggest a valuation that could attract investors looking for potentially undervalued stocks. Moreover, despite recent price declines, with the stock down around 30.69% over the last three months, the company's revenue growth has been robust at 82.22% during the same period.

InvestingPro Tips highlight a couple of key points for potential investors. DigitalBridge is trading at low EBIT, EBITDA, and earnings valuation multiples, which could indicate that the stock is undervalued relative to its earnings power. Additionally, while analysts anticipate a sales decline in the current year and a drop in net income, the company has been profitable over the last twelve months. These insights suggest that while there are some short-term challenges, the underlying financials may offer a silver lining for long-term investors.

For investors seeking a deeper dive into DigitalBridge's performance and potential, there are additional InvestingPro Tips available. These tips provide a comprehensive analysis that could be vital for making informed investment decisions. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and access the full breadth of insights, including 13 additional tips on DigitalBridge, at https://www.investing.com/pro/DBRG.

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