On Wednesday, Wolfe Research initiated coverage on shares of Apollo Global Management (NYSE:APO) with an Outperform rating and a price target of $139.00. The firm highlighted Apollo's strong position in the Private Credit and Fixed-Deferred Annuity markets, noting that approximately 60% of the company's last twelve months' pre-tax earnings were derived from its insurance operations, specifically Spread Related Earnings (SRE).
Apollo Global Management is seen as more sensitive to interest rates compared to its peers due to its insurance earnings. Although Wolfe Research forecasts earnings growth to be slightly affected by lower rates, anticipating a 6% lower EPS than the 2026 consensus, the firm remains positive on Apollo's ability to drive growth in the insurance sector. The analyst mentioned that increased sidecar utilization is expected to boost return on equity and capital efficiency in the long term.
The report also pointed out Apollo's potential for mid-teens percentage EPS growth through 2026, supported by sustained growth in its insurance segment, a robust fee-related earnings growth algorithm, and an increase in stock buybacks. Wolfe Research believes that the current share price, trading at approximately 14 times the firm's adjusted 2026 EPS estimate, presents a discount when compared to peers, which trade around 18 times their estimates.
In addition to the positive outlook on earnings growth, Wolfe Research identifies several near-term catalysts that could lead to outperformance of Apollo Global Management's shares. These include anticipated positive developments from the company's Investor Day on October 1, the possibility of inclusion in the S&P 500 index, and potential additional ratings upgrades for Athene, Apollo's retirement services subsidiary. The initiation of the Outperform rating reflects confidence in the company's growth and return potential.
In other recent news, Apollo Global Management has been making significant waves in the investment world. Apollo has proposed a hefty investment of up to $5 billion in chipmaker Intel (NASDAQ:INTC), a move that could provide a much-needed financial infusion for the semiconductor giant. Simultaneously, Apollo has been in discussions with BNP Paribas (OTC:BNPQY) to initiate a strategic financing and capital markets collaboration, with BNP Paribas committing an initial $5 billion in financing to support investment-grade, asset-backed credit originated by Apollo and ATLAS.
In addition, Apollo has acquired a majority stake in Freedom CNG, a Texas-based operator of compressed natural gas and renewable natural gas fueling stations. This strategic acquisition accentuates Apollo's commitment to supporting the energy transition and aligns with its broader strategy of deploying capital in energy transition and sustainability-related investments.
From an analytical standpoint, Apollo has received positive feedback from several firms. Citi and TD Cowen have both maintained their Buy ratings on Apollo, while BofA Securities has upgraded Apollo's stock from Neutral to Buy.
InvestingPro Insights
InvestingPro data highlights key financial metrics for Apollo Global Management (NYSE:APO), offering a snapshot of the company's current standing. With a market capitalization of $71.37 billion and a P/E ratio of 13.44, Apollo's valuation is notable, especially when considering its adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at 13.88. This valuation comes in the context of a slight revenue decline of 2.78% over the same period, reflecting the challenges mentioned by analysts regarding anticipated sales declines.
Despite the revenue contraction, Apollo's gross profit margin remains robust at 37.18%, indicating a strong ability to retain earnings relative to revenue. Additionally, the company's Price / Book ratio as of Q2 2024 is 5.14, which, when paired with the fact that Apollo is trading near its 52-week high at 98.58% of this peak, suggests a premium valuation that the market is willing to pay for its shares. This aligns with the InvestingPro Tip that Apollo is trading at a high Price / Book multiple, reinforcing the firm's status as a prominent player in the Financial Services industry.
Apollo's dividend yield of 1.48% and a recent dividend growth of 7.56% demonstrate its commitment to shareholder returns, which has been consistent over 14 consecutive years. This is in accordance with another InvestingPro Tip highlighting the company's reliable dividend payments. For investors seeking additional insights, there are 12 more InvestingPro Tips available, offering a deeper dive into Apollo's financial health and market position.
Overall, these InvestingPro Insights provide a valuable perspective on Apollo Global Management's financial status and market perception, complementing the analysis provided by Wolfe Research and offering investors a more comprehensive understanding of the company's potential.
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