Blackstone Faces Mixed Trends But Holds Long-Term Growth Potential, Analyst Says

JMP Securities analyst Brian McKenna maintained a Hold rating on Blackstone Inc BX.

Blackstone reported mixed 3Q23 earnings. Core business trends were also mixed, as fundraising totaled $25 billion in the period (lightest quarter on record since 3Q20), and deployment totaled $12 billion (vs. the prior four-quarter average of $20 billion). 

At the same time, investment performance was solid (most strategies outperformed public indices). 

The stock ended the day down ~8% (vs. down 4% for the rest of the group on average), more of an outsized move for BX around earnings, but the stock has been trading near/at ~20x his 2024 estimate more recently, so the bar was high.

Trends continue to be mixed, which has weighed on underlying growth across the business in the short term (he currently modeled 5% YOY FRE growth in 2023 following 9% YOY FRE growth in 2022) and noted Street expectations for realizations are too high (the current softness in related activity will likely persist into early 2024). So, he noted that both of these dynamics contributed to the sell-off in shares. 

Heading out of earnings, the analyst cut 4Q23 and 2024 estimates but is still 10% below the Street for next year. 

The analyst is confident that these near-term cyclical headwinds will pass (ultimately resulting in more normalized growth and earnings), and the market will focus more on the secular growth nature of Blackstone’s business over time. 

The analyst finds the company is clearly the leader in an industry set to grow double-digit percentages annually for the next 5+ years and fully expects to see continued market share gains from the firm over time, likely resulting in mid-to-upper-teen growth through the cycle. 

The analyst projects Q4 revenue and EPS of $2.95 billion vs. consensus $3.35 billion and $1.20 vs. consensus $1.25.

Price Action: BX shares are up 0.21% to $94.42 on the last check Friday.