On Friday, Wolfe Research analyst Steven Chubak upgraded Carlyle Group LP (NASDAQ:CG) stock from Peerperform to Outperform, setting a price target of $60.00. The upgrade comes as Carlyle, currently trading at $50.73 with a market capitalization of $18.15 billion, has demonstrated strong momentum with a 34% return over the past year.
Chubak's upgrade stems from a bullish stance on the alternative asset management group since October 2023, despite previous reservations about Carlyle Group's potential due to a cautious private equity outlook and factors favoring its peers.
Chubak acknowledges the risks to consensus management fee estimates in the coming quarters but contends that Carlyle Group is significantly undervalued compared to other names in the capital markets sector, particularly M&A boutiques. He suggests that Carlyle Group should benefit from tailwinds similar to those affecting firms with strong M&A realization and deployment activity, which he believes is not currently reflected in Carlyle's stock multiple.
The analyst's commentary highlights observable improvements in Carlyle Group's realization activity. Chubak points out that the company's stock is trading at approximately 12 times Wolfe Research's 2026 share-based compensation-adjusted earnings per share (EPS) estimate.
This valuation is about half that of Market Corporation and 45% of Blackstone Group (NYSE:BX), despite Carlyle's comparable fee-related earnings growth. He anticipates that Carlyle's fundamental outlook will steadily improve, leading to a convergence of its multiple with those of its peers over the next 6 to 12 months.
This upgrade reflects a shift in Wolfe Research's view of Carlyle's risk-reward balance and an expectation of the company's valuation catching up with its competitors in the capital markets space. The new Outperform rating and $60 price target represent a notable change in the firm's assessment of Carlyle Group's investment appeal.
In other recent news, The Carlyle Group has been making notable strides. The investment firm reported robust third-quarter earnings, with a noteworthy 36% year-over-year increase in fee-related earnings (FRE) to $278 million, and a record 47% FRE margin.
Carlyle is steadily moving towards its $1.1 billion annual FRE target, bolstered by $9 billion in new capital raised in the quarter and a total of $43 billion over the past year. The firm's assets under management have reached a record high of $447 billion, primarily due to substantial inflows in its Global Wealth segment.
In a recent show of confidence, Oppenheimer adjusted its outlook on The Carlyle Group, raising the investment company's price target from $78.00 to $85.00, while maintaining an Outperform rating for the firm's shares. This adjustment follows a period of challenges for Carlyle, which under the leadership of CEO Harvey Schwartz, has shown signs of progress.
Carlyle Group also underscored its commitment to enhancing shareholder value, with $150 million in shares repurchased in Q3, bringing the total to $480 million for the year. Analysts anticipate continued growth in fundraising and management fees, and a positive market response post-election is expected to boost CEO confidence and M&A activity.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.