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On Tuesday, Redburn-Atlantic initiated coverage on The Blackstone Group (NYSE:BX) with a Neutral rating and set a price target of $134. This new coverage highlights Blackstone's significant exposure to real estate and private equity (PE), which combined, accounted for about 75% of the company's fee-related earnings (FRE) and distributable earnings (DE) in 2023.
The firm noted Blackstone's potential to benefit from any reduction in interest rates, especially in the U.S., as higher interest rates have previously negatively impacted asset classes like real estate and PE. The analysis pointed out that Blackstone's earnings potential is significant, citing that in 2023, the company achieved a level of realizations comparable to the years 2018-2020, even though its performance-fee eligible assets under management (AuM) were roughly double.
Despite concerns over the real estate market, Redburn-Atlantic recognized Blackstone's ability to command a premium within the sector. This premium is attributed to the company's sustained strong growth despite its large scale, its proven track record of investment performance, and the strength of its brand.
The firm's assessment of Blackstone's valuation, in conjunction with other primary investment considerations, has led to the decision to rate the stock as Neutral with the price target of $134.
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