On Thursday, UBS reiterated its Buy rating on shares of The Blackstone Group (NYSE:BX), maintaining a price target of $19.00. The firm highlighted Blackstone's potential exit from a longstanding investment through another secondary offering, noting that the stock's recent sideways movement might have been influenced by investors' anticipation of this event. Despite a 6-point decline against the S&P 500 since April 1, UBS believes the stock's positive response today reflects a growing investor interest as Blackstone reduces its concentration in the investment, which could improve the stock's liquidity and help narrow its discount compared to peers.
The firm pointed out that Blackstone's stock trades at a significant discount to its peers, over 40% on a next twelve months (NTM) enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) basis. This valuation gap is expected to decrease as the company's float increases and the concentration of Blackstone's holding in the investment diminishes.
During its recent Capital Markets Day, the management of Gates Industrial (NYSE:GTES), referred to by its ticker GTES, outlined a strategy to achieve earnings per share (EPS) of over $2 by 2026. This growth is anticipated to come from a margin improvement of 250 to 400 basis points due to enterprise initiatives. The company also expects to outperform the market by capitalizing on secular trends such as the transition from chain to belt systems and personal mobility.
Finally, UBS noted that Gates Industrial's approach to capital allocation could provide additional upside. The company has indicated that reducing debt is a priority, which could contribute to its financial strength and stock performance. UBS's commentary suggests that Blackstone's strategic moves and Gates Industrial's growth plans are factors that could positively impact Blackstone's stock value.
InvestingPro Insights
As Blackstone Group (NYSE:BX) navigates through its strategic moves, insights from InvestingPro provide a deeper understanding of its current financial landscape. Blackstone's market capitalization stands at a robust $156.58 billion, reflecting investor confidence in the company's market position. Despite a high P/E ratio of 45.55, which indicates a premium valuation compared to earnings, the company's revenue growth has been impressive, with a 129.76% increase over the last twelve months as of Q1 2024. This suggests that Blackstone's operational performance is robust, supporting UBS's optimistic outlook.
InvestingPro Tips highlight that Blackstone is expected to experience net income growth this year, aligning with UBS's positive sentiment. However, it's worth noting that 10 analysts have revised their earnings expectations downwards for the upcoming period, signaling potential caution. Blackstone's strong revenue growth and net income prospects, juxtaposed with analyst revisions, paint a nuanced picture for investors.
For investors seeking to delve deeper into Blackstone's financials and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/BX. Use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription and gain access to these valuable insights. With more tips to explore, investors can make well-informed decisions based on a comprehensive analysis of Blackstone's performance and market trends.
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