Decisive Investments and Innovation Propel Growth in Private Wealth and Insurance, Despite Market Uncertainties

What are the underlying business or industry changes driving this perspective?

• Significant momentum in private wealth and insurance channels, which could provide a stable and growing source of fee-related earnings. This is likely to impact revenue growth and margin expansion.
• Near-term deployment plans with nearly $200 billion of dry powder, which suggests aggressive investment in undervalued assets and sectors that could lead to enhanced performance revenues and earnings growth as market conditions improve.
• Exceptional outperformance in flagship strategies compared to public indices across asset classes, indicating robust internal investment and risk management capabilities that could continue to attract institutional and retail investors, driving AUM growth.
• Strategic positioning in sectors such as digital infrastructure, enterprise software, and energy transition, reflecting a focus on future growth areas that could lead to superior investment returns and further boost earnings.
• Enhanced data analytics capabilities across a broad portfolio that offers unique insights and competitive advantages in investment decisions, potentially leading to superior asset selection, risk management, and operational efficiencies that can impact long-term earnings and margin improvement.

How have these above catalysts been quantified?

• Analysts are assuming Blackstone's revenue will grow by 28.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 18.1% today to 49.8% in 3 years time.
• Analysts expect earnings to reach $8.2 billion (and earnings per share of $6.49) by about March 2027, up from $1.4 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.5x on those 2027 earnings, down from 64.1x today.
• To value all of this in today’s dollars, we will use a discount rate of 6.97%, as per the Simply Wall St company report.

What could happen that would invalidate this narrative?

• Economic uncertainty and geopolitical instability could result in market volatility affecting the valuation of investments and potentially impacting revenue.
• The potential moderation of investor confidence due to shifts from a restrictive monetary policy could affect the ability to raise and deploy capital, impacting earnings.
• The reliance on the performance of asset classes such as real estate, which experienced a difficult environment, may risk revenue if market conditions do not improve as expected.
• A significant amount of the company’s future success is predicated on outperforming market indices, which poses a risk to earnings if these performance goals are not met, particularly in challenging market conditions.
• The firm's heavy reliance on realizations for driving distributable earnings suggests that any delay or reduction in realizations, possibly due to unfavorable market conditions, could negatively impact net margins and earnings.

• The analysts have a consensus price target of $127.7 for Blackstone based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with this, you'd need to believe that by 2027, revenues will be $16.4 billion, earnings will come to $8.2 billion, and it would be trading on a PE ratio of 22.5x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $124.8, the analyst's price target of $127.7 is 2.3% higher. The relatively low difference between the current share price and the analyst target indicates that they believe 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.