On Wednesday, JPMorgan resumed coverage on shares of Apollo Global Management (NYSE:APO) with an Overweight rating and a stock price target of $122.00, moving up from a previous Neutral rating. The firm had not been rating the company prior to this update due to a period of restriction.
JPMorgan highlighted Apollo's unique position among public alternative asset managers, noting its potential to benefit from trends like the growth of private credit and the demand for retirement income.
Apollo's strategy, particularly in insurance, is differentiated from its peers by providing better annuity prices and yields, which has led to leading asset management and insurance sales growth. The company's approach has been marked by capital efficiency despite a balance sheet that is heavier than that of some competitors.
Apollo's recent acquisition and internalization of Athene was pointed out as an example of its balance sheet-intensive operations, which contrasts with the capital-light models of firms like Blackstone (NYSE:BX) and Ares.
JPMorgan acknowledged that while Apollo's capital-heavy model could affect investor perception, especially if economic conditions worsen, the firm's innovative leadership and business model were key factors in the Overweight rating. The model aims to give investors more desirable fee-related earnings backed by an inventive third-party capital structure.
JPMorgan's valuation of Apollo employs a sum-of-the-parts methodology. The asset management division is valued in line with the market, while the insurance operations are given a premium valuation. This approach underpins the December 2024 price target of $122 for Apollo Global Management shares.
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