On Tuesday, Piper Sandler initiated coverage on shares of Apollo Global Management (NYSE:NYSE:APO), assigning an Overweight rating to the stock along with a price target of $188.00. The firm highlighted Apollo's strategic positioning at the forefront of several major secular trends that are expected to influence the market.
According to the firm, Apollo Global Management stands to benefit from an expanding total addressable market (TAM) as it offers products and services tailored to the aging baby boomer generation. This demographic shift, often referred to as the "silver tsunami," presents significant opportunities for growth in the financial sector.
The firm also pointed out that Apollo is navigating changes in the investment landscape, where perceptions of what constitutes a safe or risky investment have evolved, particularly in private and public markets. Apollo's approach to redefining financial services through superior asset and liability origination was noted as a key strength.
Piper Sandler believes that Apollo Global Management's potential inclusion in the S&P 500 index could act as a near-term catalyst for the stock. This anticipation is bolstered by the company's recent investor day, where Apollo set ambitious growth targets. The firm aims for a 20% increase in fee-related earnings (FRE) and a 10% rise in spread-related earnings (SRE) through 2029.
The analyst from Piper Sandler stated that these targets are likely to adjust the FRE/SRE mix to an even 50%/50% by 2029, a significant shift from the current 36%/64% as of approximately 2023. This prospective rebalancing is expected to support Apollo's valuation multiple going forward.
In other recent news, Apollo Global Management has been the subject of positive attention from several financial firms. KBW raised the investment firm's price target to $168, citing higher Fee Related Earnings (FRE), Strategic and Risk Earnings (SRE), and Principal Investment Income (PII) as key contributors. BMO Capital also increased Apollo's price target to $157, highlighting the company's strides towards its 2029 financial objectives. TD Cowen, meanwhile, raised its price target for Apollo to $178, reflecting a positive outlook on the firm's future earnings potential.
Evercore ISI maintained an Outperform rating for Apollo's shares and increased the investment firm's price target to $174, emphasizing Apollo's unique approach to asset management. Deutsche Bank (ETR:DBKGn) maintained a Buy rating, highlighting Apollo's record $62 billion in third-quarter origination and solid Fee-Related Earnings (FRE) results.
These recent developments follow a robust third quarter for Apollo, marked by record FRE of $531 million, strong spread-related earnings (SRE) of $856 million, and an adjusted net income of $1.1 billion. Apollo's focus on expansion opportunities in retirement services and Principal Warranty and Collateral, coupled with a distinguished origination platform, underscores its growth potential. The company aims for both FRE and SRE to reach $10 billion by 2029, with adjusted net income doubling to $15 per share.
InvestingPro Insights
Apollo Global Management's strong market position, as highlighted by Piper Sandler, is further supported by recent InvestingPro data. The company's market capitalization stands at an impressive $92.97 billion, underscoring its significant presence in the financial services industry. This aligns with the InvestingPro Tip that Apollo is a "prominent player in the Financial Services industry."
The firm's growth potential, as outlined in the article, is reflected in its attractive valuation metrics. Apollo's adjusted P/E ratio of 14.93 and a remarkably low PEG ratio of 0.18 suggest that the stock may be undervalued relative to its earnings growth prospects. This is consistent with the InvestingPro Tip that Apollo is "trading at a low P/E ratio relative to near-term earnings growth."
Moreover, Apollo's financial performance has been robust, with a revenue growth of 22.97% over the last twelve months and an impressive quarterly revenue growth of 285.13%. This strong performance has translated into substantial returns for investors, with the stock price showing a 92.03% total return over the past year and currently trading at 97.42% of its 52-week high. These metrics align with the InvestingPro Tips highlighting Apollo's "high return over the last year" and that it's "trading near 52-week high."
For investors seeking more comprehensive insights, InvestingPro offers 16 additional tips on Apollo Global Management, providing a deeper understanding of the company's financial health and market position.
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