Citi Upgrades BlackRock To Buy, Lifts Target To $410

There has been tremendous speculation regarding the Department of Labor's [DoL] announcement of a new Fiduciary rule impacting financial advisors. Citi’s William R Katz upgraded the rating for BlackRock, Inc. BLK from Neutral to Buy, saying that the company is an “increasingly differentiated winner in a post DoL world.” The price target was raised from $340 to $410.

Factors That Support The Buy Call

Analyst William Katz enumerated the positives for BlackRock as:

1. 1Q results “reinforce our building view” that the company could benefit significantly from the pending DoL reform.
2. There seems to be “ample runway” for BlackRock’s flagship passive platform, iShares.
3. The company faces the opportunity to commercialize FutureAdvisor. This frontend client capture technology can be synthesized with the BRS platform, “creating an incremental revenue and growth segment and further differentiating BLK from the pack, the latter facing rising commoditization risks,” Katz wrote.
4. Favorable margin dynamics could enable BlackRock to make adequate reinvestments to boost growth and achieve share gains.

Four Catalysts

Katz mentioned four drivers for BlackRock’s shares:

1. Rest of 1Q16 earnings season for Traditionals
2. Analyst Day, scheduled for June 15
3. “DoL implementation updates across A/Ms and B/Ds through early ‘18”
4. FutureAdvisor updates