On Monday, TD Cowen adjusted its stance on Blue Owl Capital (NYSE:OWL) stock, moving from a "Buy" to a "Hold" rating, while also reducing the 12-month price target from $21.50 to $19.00. The revision reflects a more cautious outlook on the company's earnings potential and dividend projections.
The downgrade was prompted by several concerns. The firm highlighted a perceived increase in downside risk to the consensus expectations for the company's financial performance.
Additionally, there's less confidence in the growth prospects of the company's GP Stakes within the retail channel, which refers to the ownership stakes in general partnerships managed by Blue Owl.
TD Cowen also anticipates that Blue Owl's management will likely need to adjust its dividend expectations for 2025 downwards to $0.95, a slight decrease from the previous expectation of around $1.00. This adjustment is a key factor in the firm's revised outlook on the stock.
Despite these concerns, the analyst believes that the credit risks associated with Blue Owl Capital have been overstated by the market. However, the firm also sees limited drivers for earnings growth, which suggests that the upside potential for the stock may be constrained.
The new price target of $19.00 represents a modest reduction from the previous target but indicates caution regarding Blue Owl Capital's near-term growth and profitability prospects. The company's shares will continue to be traded on the New York Stock Exchange under the ticker symbol OWL.
In other recent news, Blue Owl Capital has been the subject of several significant developments. The firm has reported consistent growth, marking its 12th consecutive quarter of increased fee-related and distributable earnings.
Piper Sandler, Citi, and Deutsche Bank (ETR:DBKGn) have all maintained positive ratings for Blue Owl, with Piper Sandler and Deutsche Bank holding a price target of $23.00 and $21.00 respectively, while Citi has set a price target of $21.00.
These ratings reflect the companies' confidence in Blue Owl's strategies, including the successful raising of $5.2 billion for its Fund VI and the proposed acquisitions of Kuvare Asset Management and Prima Financial Advisors.
In addition, Blue Owl has made significant personnel moves, appointing Haitham Abdulkarim to lead its institutional business in the Middle East as part of its expansion strategy in the region.
However, TD Cowen has revised Blue Owl's price target to $21.50 from the previous $23.00, while still maintaining a 'Buy' rating. This adjustment comes after a slight change in earnings estimates for 2024 and 2025.
Despite these recent developments, the impact on Blue Owl Capital's financial health will be determined by future market conditions and the successful execution of these strategies.
InvestingPro Insights
In light of TD Cowen's recent adjustment of Blue Owl Capital's rating, it's worth noting that, according to InvestingPro data, the company has a market capitalization of $9.21 billion and a high P/E ratio of 117.02, which adjusts to 85.34 when considering the last twelve months as of Q1 2024. Despite the high earnings multiple, Blue Owl Capital's revenue growth remains robust, with a 24.87% increase over the last twelve months and a 31.29% quarterly growth in Q1 2024. The gross profit margin stands at an impressive 59.96%, indicating strong profitability at the core of its operations.
InvestingPro Tips suggest that Blue Owl has raised its dividend for three consecutive years and is expected to grow its net income this year. Additionally, while the stock is currently trading at a high Price / Book multiple of 5.59, it also boasts a high return over the last year, with a 62.76% price total return. These metrics may provide a more nuanced view of the company's financial health and future growth potential.
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