ARES: Future Outperformance Will Be Driven By Private Credit Momentum

The average analyst price target for Ares Management has been revised upward by nearly $4 to approximately $184. Recent earnings outperformance and the firm’s credibility in private credit are driving renewed optimism among analysts, despite ongoing industry headwinds.

Analyst Commentary

Recent research updates reflect ongoing debate among analysts regarding Ares Management’s performance and valuation, with opinion divided between optimism on growth execution and caution around sector headwinds.

• Bullish analysts have raised their price targets for Ares, citing better than expected quarterly results and strong momentum in private credit, indicating confidence in the firm’s business model.
• There is recognition of Ares’ robust fundraising activity and continued strength in fee-related earnings, supporting expectations for sustained growth and resilient execution, despite mixed returns elsewhere in the sector.
• The company’s credibility in private markets and positive stock performance, with shares up notably after earnings results even in a flat overall market, are regarded as signs of durable investor confidence and operational effectiveness.
• Some analysts see recent share price selloffs as opportunity for new buyers, highlighting Ares’ positioning in relation to credit market stability and sector leadership.

• Bearish analysts point to ongoing macroeconomic headwinds and heightened competition in the alternative asset management industry as factors that could limit near-term outperformance and weigh on valuation multiples.
• Caution remains regarding potential credit concerns, with some expecting these issues to dominate market sentiment and impact near-term returns, despite Ares’ current resilience.
• A minority see more compelling risk and reward profiles among competitors, suggesting that while Ares is fundamentally sound, other managers may offer greater near-term upside.
• Muted realizations and mixed portfolio returns are flagged as factors that could dampen growth, even as overall capital markets show signs of a rebound.

What's in the News

• EPIC Midstream, controlled by Ares Management, is exploring a sale of its stake in the EPIC Crude pipeline. The asset is valued at around $3 billion including debt, with investment bankers engaged and suitors being approached (Reuters).
• Ares Management completed the repurchase of 400,000 shares, representing 0.39% of shares outstanding, for $10.45 million under its buyback program. No shares were repurchased in the most recent tranche (Company Filing).

Valuation Changes

• Fair Value Estimate: Risen slightly from $180 to approximately $183.94. This reflects increased confidence in Ares Management’s outlook.
• Discount Rate: Increased marginally from 8.75% to 8.77%. This indicates a modest uptick in the risk premium applied to future earnings.
• Revenue Growth: Fallen from 8.28% to 6.75%. This highlights a reduction in expected top-line expansion.
• Net Profit Margin: Decreased notably from 35.80% to 31.68%. This points to tempered profitability expectations.
• Future P/E Ratio: Increased from 28.28x to 30.16x. This suggests a higher valuation for forward earnings despite lower profit margin projections.