On Monday, Citi increased the price target for Apollo Global Management (NYSE:APO) shares to $125 from the previous target of $111, while keeping a Buy rating on the stock. The adjustment follows an update of Apollo's earnings estimates after considering the company's fourth-quarter 2023 results and its outlook for the year 2024.
The firm's 2024 earnings per share (EPS) forecast was slightly reduced to $8.01 from $8.20, primarily due to an anticipated higher tax rate. However, the 2025 EPS estimate was increased to $9.42, reflecting expectations for modestly higher fee-related earnings (FRE) and simple realized earnings (SRE), as well as an adjusted share count.
Citi expressed continued confidence in Apollo's growth trajectory, citing an expected increase in origination to $200-250 billion over the next five years, up from $100B in 2023. This anticipated rise in origination is projected to contribute to growth in both FRE and SRE. The firm now forecasts a 15% growth in FRE, which aligns with the lower end of management's guidance of 15-20%. SRE growth is projected at 11% on an adjusted basis, in line with management's expectations of low double-digit growth.
The analyst from Citi noted that while the estimates are conservative, there would be no surprise if actual results outperform these projections. The revised price target of $125 implies a 15% equity total return (ETR) at the current valuation.
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