Private Wealth And Infrastructure Expansion Will Drive Future Success Amid Real Estate Recovery

Key Takeaways

• Growth in private wealth and infrastructure strategies is set to boost revenues and margins, leveraging high-performing perpetual strategies and global infrastructure demand.
  
• Strong momentum in credit, insurance, and real estate recovery positions Blackstone for stable earnings and diversified revenue growth.
  
• Persistent inflation and interest rate pressures may compress margins and affect Blackstone's asset values and earnings amid evolving market and technology dynamics.

Catalysts

An alternative asset management firm specializing in private equity, real estate, hedge fund solutions, credit, secondary funds of funds, public debt and equity and multi-asset class strategies.

• Blackstone's substantial growth in private wealth channel, with $28 billion raised in 2024 and expectations for further acceleration in 2025, is likely to significantly boost future revenues through increased assets under management in higher-margin perpetual strategies.
  
• The development and expansion of Blackstone's infrastructure business, particularly the BIP strategy generating $1.2 billion of fee revenues with 17% net returns, is poised to enhance earnings significantly as infrastructure needs continue globally, contributing to both revenue growth and margin expansion.
  
• Robust fee-related earnings growth, highlighted by a record $1.8 billion in Q4 2024, suggests improved net margins as the firm benefits from scaling key perpetual strategies like BCRED and BXPE, alongside crystallized performance fees.
  
• Continued momentum in credit and insurance, with $100 billion in inflows and strong investment performance, positions Blackstone to enhance earnings stability and growth, capitalizing on private credit opportunities and benefiting from diversified revenue streams.
  
• Anticipated recovery in the real estate sector, driven by U.S. economic strength and improved conditions such as reduced supply and stabilized borrowing costs, is expected to positively impact net margins and asset valuations, aiding in the firm's overall earnings growth.

Blackstone Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Blackstone's revenue will grow by 16.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 21.9% today to 44.9% in 3 years time.
• Analysts expect earnings to reach $9.0 billion (and earnings per share of $7.63) by about March 2028, up from $2.8 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $9.9 billion in earnings, and the most bearish expecting $8.1 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.7x on those 2028 earnings, down from 40.5x 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 1.26% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.25%, as per the Simply Wall St company report.

Blackstone Future Earnings Per Share Growth

Risks

• Market participants are concerned about persistent inflation and policy uncertainty, which can affect U.S. Treasury yields. Higher interest rates could impact Blackstone's borrowing costs and ultimately compress net margins.
  
• Real estate values have been negatively impacted by the increase in Treasury yields and the stronger U.S. dollar, which can pose risks to net asset values, thereby affecting earnings.
  
• The recovery in the real estate market is proceeding slowly, which could delay realization opportunities and affect revenue growth in the near term.
  
• The regulatory climate for mergers and acquisitions is improving, but Blackstone remains a net buyer of assets, suggesting potential exposure to higher valuation risks or integration challenges, which could impact earnings.
  
• Blackstone's significant investment in infrastructure and data centers relies on assumptions about ongoing demand. Changes in technology, like potential shifts in AI demand for data centers, could affect this segment's performance and future revenue growth.

Valuation

• The analysts have a consensus price target of $182.381 for Blackstone 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 $233.0, and the most bearish reporting a price target of just $147.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $20.0 billion, earnings will come to $9.0 billion, and it would be trading on a PE ratio of 31.7x, assuming you use a discount rate of 7.2%.
• Given the current share price of $146.19, the analyst price target of $182.38 is 19.8% 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.