Capital Inflows And Alliances Will Create Future Opportunities

Key Takeaways

• Blackstone is positioned for strong future growth with high inflows and substantial capital for opportunistic investments in undervalued assets.
  
• Strategic alliances and innovations in private credit and wealth management aim to boost revenue through expanded market reach and larger spreads.
  
• Economic and geopolitical uncertainties, including tariffs and trade negotiations, pose risks to Blackstone's revenues, real estate values, earnings, and overall financial performance.

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 has raised $62 billion of inflows in Q1 2025, marking the highest level in three years, which boosts assets under management (AUM) and gives the company a strong foundation for future revenue growth.
  
• The firm is well-positioned to benefit from market dislocation with $177 billion of dry powder available for opportunistic investments, potentially increasing future earnings as capital is deployed in undervalued assets.
  
• Blackstone's strategic alliance with Wellington and Vanguard aims to develop integrated public-private investment solutions, potentially expanding revenue channels by tapping into the private wealth market.
  
• The expansion in private credit, particularly in investment-grade private credit, shows a 35% year-over-year growth, indicating potential for significant revenue streams due to larger spreads and structural tailwinds in the credit markets.
  
• The innovation in private wealth management and strong fundraising results in this channel ($11 billion in the first quarter of 2025) suggest potential for margin expansion and revenue growth by further penetrating individual investor markets.

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 20.6% today to 47.9% in 3 years time.
• Analysts expect earnings to reach $9.4 billion (and earnings per share of $7.45) by about April 2028, up from $2.5 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $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 24.8x on those 2028 earnings, down from 40.6x today. This future PE is greater than the current PE for the US Capital Markets industry at 24.5x.
• Analysts expect the number of shares outstanding to grow by 1.83% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.29%, as per the Simply Wall St company report.

Blackstone Future Earnings Per Share Growth

Risks

• Tariffs and ongoing multilateral trade negotiations introduce significant uncertainty that could impact economic growth and inflation, influencing investor sentiment and potentially affecting Blackstone's future revenues.
  
• Potential increases in construction costs due to tariffs may reduce new supply in real estate, affecting Blackstone's real estate portfolio values and consequently impacting revenue and net margins.
  
• Market volatility and geopolitical concerns could reduce the near-term realization activity, affecting Blackstone’s distribution of earnings and net margins from asset sales.
  
• The high level of market uncertainty may delay investment deployment, diminishing the opportunity for immediate capital gains, and potentially affecting earnings growth.
  
• The economic slowdown risk due to delayed tariff diplomacy could negatively affect a broader range of companies in Blackstone's portfolio, potentially impacting asset valuations and overall financial performance.

Valuation

• The analysts have a consensus price target of $146.05 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 $175.0, and the most bearish reporting a price target of just $109.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $19.6 billion, earnings will come to $9.4 billion, and it would be trading on a PE ratio of 24.8x, assuming you use a discount rate of 7.3%.
• Given the current share price of $133.54, the analyst price target of $146.05 is 8.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• 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.