CVC Capital Partners upgraded to ’buy’ by BofA on valuation, fund stability

Investing,com -- BofA Securities has upgraded CVC Capital Partners (AS:CVC) to a “buy” from “neutral,” citing sharp share price underperformance and resilient fundamentals, in a note dated Friday. 

The price objective was lowered to €19.50 from €22.50, still implying a 21% upside from the last close of €16.11.

CVC shares have declined 24% year-to-date, underperforming the broader European private markets sector by 15 percentage points. 

Despite a sector-wide rebound post-April 7, CVC has not recovered and remains about 30% below its April 2024 peak of €23.40. 

BofA analysts said the selloff appears overdone, making the stock attractive at current levels.

The downgrade comes amid weaker performance-related earnings (PRE). BofA has lowered 2025 and 2026 EPS forecasts by 5%, citing a slower exit environment. 

Cumulative EPS cuts since the start of the year range between 10–17%. The 2025 PRE estimate was reduced by 19% and 2026 by 11%, based on delayed realisations. 

However, PRE is still expected to grow 42% year-over-year in 2025, albeit 36% below the bottom end of the firm’s medium-term guidance range of €400–700 million.

In contrast, management fee earnings (MFE) remain largely unaffected. CVC’s MFE for 2025 is forecast at €858 million, up 10% from a pro-forma €780 million in 2024, and above guidance for high single-digit growth. 

Management fees are projected to reach €1.464 billion in 2025, supported by recent fundraising in Secondaries, Credit, and Infrastructure.

Assets under management (AUM) declined 4% in Q1 2025 to €142 billion due to expected fund runoff, but BofA projects a modest rebound to €146 billion by year-end. 

A more substantial AUM rise is expected in 2027, when new flagship funds in Europe/Americas and Asia are due for activation, maintaining the firm’s 3–4 year fundraising cycle.

Despite market uncertainty, BofA believes CVC’s diversified fundraising channels and lower U.S. exposure, around 20% of its portfolio, make it less vulnerable to domestic market swings. 

The brokerage also sees strong institutional demand in Secondaries and Credit, which combined account for nearly half of CVC’s AUM.

On valuation, CVC trades at 16x 2026 earnings, near its all-time low and at a discount to peers like EQT (ST:EQTAB) at 22x. 

BofA’s sum-of-the-parts valuation includes a 23x multiple on MFE and 14x on PRE, yielding the €19.50 price target based on a blended 19x 2026 PE ratio.

A potential overhang stems from a 13% stake held by strategic investors now out of lock-up, although management retains 70% ownership under staggered lock-up provisions.

The analysts added that CVC’s current valuation offers a compelling entry point given stable fee earnings and long-term growth visibility.