On Thursday, Citi analysts, led by Chris Allen, reinstated coverage of Blue Owl Capital (NYSE: OWL) with a Buy rating and a price target of $30.00. The firm had previously suspended its rating on the asset management company. In their assessment, they cited several factors contributing to their positive outlook, including the company's earnings potential, business mix, and the permanence of its capital model. According to InvestingPro data, the company has demonstrated strong momentum with a 73.82% return over the past year and is currently trading near its 52-week high of $25.61, though slightly above its Fair Value estimate.
The analyst's statement highlighted the potential for growth stemming from recent acquisitions, which are expected to expand Blue Owl Capital's presence in the insurance channel, alternative credit segment, and infrastructure/real estate, as well as providing product diversity, especially in credit. These strategic moves are anticipated to complement the firm's organic growth, with an average EPS growth forecast of 18% over the next three years. InvestingPro data shows impressive revenue growth of 32.15% in the last twelve months, with the company maintaining a strong financial position as evidenced by its "GREAT" Financial Health Score of 3.21.
Looking ahead, the analyst pointed to Blue Owl Capital's upcoming investor day on February 7, 2025, as a potential positive catalyst. This event marks the company's first investor day since 2022 and is expected to focus on long-term growth opportunities. The analyst anticipates that the presentation will cover the impact of recent deals, product development, and cross-sell opportunities across segments. With a market capitalization of $38.13 billion and a healthy current ratio of 1.96, the company appears well-positioned for its growth initiatives. For deeper insights into Blue Owl Capital's financial health and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
Additionally, the investor day is expected to provide long-term guidance on several financial metrics, including fee-paying assets under management (FPAUM), fee-related revenues, after-tax distributable earnings (A/T DE), and fee-related earnings (FRE) margins. These projections are seen as supportive of the growth thesis for Blue Owl Capital.
Citi's resumption of coverage with a favorable rating and an attractive price target reflects their confidence in Blue Owl Capital's strategy and potential for continued growth in the asset management industry.
In other recent news, Newmark Group (NASDAQ:NMRK) has secured a $2.3 billion loan for a data center project in Texas, backed by JP Morgan and involving Blue Owl Capital, among others. The data center is expected to begin operations in early 2025. Simultaneously, Blue Owl Capital is considering merging several portfolio firms to form a significant industry player. This move comes as Blue Owl Capital's shareholders have approved a merger between Blue Owl Capital Corporation and Blue Owl Capital Corporation III, aiming to create a more diversified business development company.
In other developments, Databricks Inc. has secured over $5 billion in its largest debt financing round to alleviate tax burdens related to stock sales by its employees. This coincides with a $10 billion funding round that increased the company's valuation to $62 billion. Databricks anticipates surpassing $3 billion in annualized revenue by the end of the fiscal year in January 2025.
Meanwhile, Goldman Sachs downgraded Blue Owl Capital's stock from Buy to Neutral, citing an anticipated slowdown in its credit business' compound annual growth rate and increasing competition. However, Piper Sandler raised the price target for Blue Owl Capital to $25, showing confidence in the company's long-term growth, particularly its forecasted fee-related earnings growth of over 25%. These developments reflect the dynamic nature of the investment landscape, with companies like Databricks and Blue Owl Capital making strategic moves to position themselves for future growth.
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