Downgrading Blackstone To Neutral Despite Ongoing Fundraising Super Cycle: JP Morgan Analyst Explains

JP Morgan analyst Kenneth B. Worthington downgraded Blackstone Inc BX from Overweight to Neutral, raising the price target to $111 from $102.

The analyst thinks Blackstone remains a best-in-class alternative asset manager, continuing to leverage secular trends around asset allocation with better growth.

Worthington expects organic growth supported by perpetual fund growth, which is currently weighed down by a depressed sentiment for real estate investing.

Blackstone reported 2Q23 Distributable Earnings (post-tax) of $1.2 billion or $0.93/share, in line with Street consensus (beating the analyst's estimate of $1.1 billion). Asset under management rose 6% Y/Y to $1.0 trillion, with inflows of $30.1 billion in Q2.

However, the analyst notes that fee earning AUM declined in the quarter from $732 billion to $731 billion. While this marked just a modest decline, it was the first seen since 2Q18, the analyst cautioned.

The analyst remains upbeat about management's comments regarding a potential thawing of dealmaking activity in Private Equity as a positive for Private Equity and Private Credit.

The Blackstone team reiterated its bullishness on the insurance opportunity and long-term prospects for the retail/private wealth channel - consistent with commentary from prior quarters, notes the analyst.

Blackstone is amid its latest fund raising super cycle, which the analyst expects to drive FRE and earnings growth. 

However, Worthington downgrades Blackstone to Neutral as it trades at a best-in-class valuation, which is appropriate at current levels. 

Price Action: BX shares are trading lower by 1.98% to $105.38 on the last check Friday.