Expansion Into Private Wealth And Infrastructure Will Strengthen Client Relationships In 2025

Key Takeaways

• The integration of Angelo Gordon and increased capital raising efforts are set to enhance TPG's revenue growth in 2025.
  
• Expansion into private wealth and infrastructure investments are expected to drive client growth and diversify earnings.
  
• TPG's growth may be impacted by integration challenges, market volatility, unmet fundraising targets, partnership delays, and uncertainties in new initiatives.

Catalysts

Operates as an alternative asset manager in the United States and internationally.

• The integration of Angelo Gordon has begun to realize revenue synergies, positioning TPG for accelerated revenue growth in 2025.
  
• TPG plans to significantly increase capital raising in 2025 compared to 2024, which is expected to positively impact revenue.
  
• The expansion into private wealth and the launch of an evergreen private equity vehicle targeting the retail channel are expected to drive revenue and client relationship growth.
  
• The growing infrastructure investments, such as the Rise Climate Transition Infrastructure Fund, are likely to enhance earnings as the firm expands into new asset classes.
  
• TPG's ongoing efforts to leverage strategic partnerships, such as those with Google and other large-scale investors, are anticipated to fuel growth and positively impact earnings and potentially net margins.

TPG Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming TPG's revenue will decrease by 6.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.0% today to 14.3% in 3 years time.
• Analysts expect earnings to reach $407.8 million (and earnings per share of $3.33) by about March 2028, up from $-307.0 thousand today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $334.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 95.8x on those 2028 earnings, up from -18223.9x today. This future PE is greater than the current PE for the US Capital Markets industry at 23.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.27%, as per the Simply Wall St company report.

TPG Future Earnings Per Share Growth

Risks

• TPG may face challenges in successfully integrating and generating anticipated synergies from the Angelo Gordon acquisition, which could impact revenue growth if additional costs or operational disruptions occur.
  
• High reliance on capital markets for deployment and monetization, which could be hindered by market volatility or economic downturns, potentially impacting realized performance revenues and net margins.
  
• TPG's ambitious target of doubling AUM and significant reliance on fundraising may not be met if investor demand for alternative asset management softens, potentially affecting management fee growth and earnings.
  
• Complications or delays in building strategic partnerships, particularly with traditional financial institutions and insurance companies, could slow TPG's growth in fee-related earnings and diversification efforts.
  
• The success of new initiatives in areas such as private wealth and infrastructure is not guaranteed, and unexpected regulatory changes or competitive pressures could lead to lower-than-expected revenue and earnings from these growth areas.

Valuation

• The analysts have a consensus price target of $70.0 for TPG based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $62.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.9 billion, earnings will come to $407.8 million, and it would be trading on a PE ratio of 95.8x, assuming you use a discount rate of 7.3%.
• Given the current share price of $49.2, the analyst price target of $70.0 is 29.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.