On Wednesday, TD Cowen expressed a positive outlook on Ares Management, L.P. (NYSE: NYSE:ARES) shares, raising its price target on the company's shares to $175 from $162, while reiterating a Buy rating. The adjustment follows a detailed review of Ares' recent acquisition, which involved a $3.7 billion purchase of GCP International's $44 billion in assets under management (AUM).
The firm's analyst noted that despite a roughly 4% drop in Ares' stock price following the announcement of the acquisition on Tuesday, their discounted cash flow (DCF) analysis indicates a potential value creation of approximately $9 per share. The analyst believes that the merger of Ares and GCP International will provide a significant opportunity for growth, expanding the company's reach in the real assets market.
The acquisition is seen as a strategic move that could enhance Ares' position in the market by increasing its total assets under management and broadening its product offerings. The firm maintains that Ares Management remains one of their top picks in the sector, anticipating that the combined ARES/GCP platform will continue to see an expansion of its total addressable market (TAM) in the real assets space.
The market's initial reaction to the acquisition may have been cautious, but TD Cowen's analysis suggests the potential for long-term growth and value addition. The raised price target reflects the firm's confidence in the future performance of Ares Management, bolstered by the recent strategic acquisition.
In other recent news, Ares Management Corporation has launched a public offering of 27 million shares of Series B Mandatory Convertible Preferred Stock to fund the acquisition of GLP Capital Partners Limited's international business.
The offering includes an option for underwriters to purchase an additional 3 million shares to cover over-allotments. Joint bookrunning managers for the offering are Morgan Stanley and Citigroup. Ares also recently acquired Walton Street Capital Mexico, adding approximately $2 billion in industrial real estate assets to its portfolio.
In terms of analyst coverage, Jefferies has raised its price target for Ares Management to $154, maintaining a Hold rating. TD Cowen continues to hold a bullish stance on Ares with a Buy rating, while CFRA raised its price target for Ares to $170. Conversely, Redburn-Atlantic initiated coverage on Ares Management with a Neutral rating.
Ares Management's total assets under management increased by 18% year-over-year, reaching $447.2 billion in the second quarter of 2024, and the company saw a 21% increase in its third-quarter common dividend. Furthermore, the National Football League approved Ares Management, among other private equity firms, to acquire up to 10% stakes in its teams. These are recent developments that reflect the ongoing activities within the company.
InvestingPro Insights
To complement TD Cowen's bullish outlook on Ares Management, L.P. (NYSE: ARES), recent data from InvestingPro provides additional context for investors. As of the latest available data, Ares boasts a substantial market capitalization of $48.35 billion, underscoring its significant presence in the asset management sector.
InvestingPro Tips highlight that Ares has maintained dividend payments for 11 consecutive years and has raised its dividend for 4 consecutive years. This consistent dividend policy aligns with the company's strong financial position and may appeal to income-focused investors. The current dividend yield stands at 2.43%, with a notable dividend growth of 20.78% over the last twelve months.
The company's financial performance has been robust, with a one-year price total return of 44.22% and a year-to-date return of 31.61%. These figures support TD Cowen's positive stance on the stock. However, it's worth noting that Ares is trading at a high P/E ratio of 77.74, which may indicate that the market has already priced in significant growth expectations.
For investors seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Ares Management on the platform.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.