BlackRock Inc. (BLK)
BlackRock Analyst Coverage Update
Jefferies & Company: On July 11, 2024, Jefferies & Company reiterated their Buy rating for BlackRock Inc., setting a target price of USD 934.
Morgan Stanley & Co.: Morgan Stanley & Co. also maintained their Overweight rating but adjusted their target price from USD 1025 to USD 1013.
Consensus and Average Price Targets
Based on the forecasts from 9 analysts, the average target price for BlackRock Inc. over the next 12 months is USD 898.19. This reflects a strong consensus in favor of the stock’s potential, with an average analyst rating of Strong Buy.
Stock Target Advisor’s Analysis
Stock Target Advisor provides a more balanced perspective with a Neutral rating for BlackRock Inc. This neutral stance is derived from an equal number of positive and negative signals (8 each). This suggests that while there are favorable aspects to the stock, there are also potential risks or uncertainties that investors should consider.
Recent Stock Performance
As of the last closing, BlackRock Inc.’s stock price was USD 812.00. The stock has demonstrated positive momentum over various time frames:
- +2.90% over the past week,
- +5.98% over the past month,
- +16.64% over the last year.
Fundamental Analysis
Positive Fundamentals
- Superior Risk-Adjusted Returns
- Performance: BlackRock has outperformed its sector peers on a risk-adjusted basis over a holding period of at least 12 months, placing it in the top quartile. This indicates that the stock offers superior returns relative to the risk taken.
- Positive Cash Flow
- Cash Flow: The company has reported positive total cash flow in the most recent four quarters, reflecting strong operational efficiency and financial health.
- Positive Free Cash Flow
- Free Cash Flow: BlackRock has also shown positive total free cash flow in the most recent four quarters, indicating its ability to generate surplus cash after accounting for capital expenditures.
- Superior Capital Utilization
- Return on Invested Capital (ROIC): The company has delivered better ROIC compared to its peers in the most recent four quarters, placing it in the top quartile. This shows effective use of capital to generate returns.
- High Market Capitalization
- Market Position: BlackRock is one of the largest entities in its sector, placing it in the top quartile. Large market cap companies tend to be more stable and attract institutional investors.
- High Gross Profit to Asset Ratio
- Profitability: The stock is in the top quartile compared to its peers on the Gross Profit to Asset Ratio, a popular measure among value investors for long-term superior returns.
- High Dividend Returns
- Dividends: BlackRock has outperformed its sector peers in terms of average annual dividend returns over the past five years, making it attractive for income-seeking investors.
- Superior Return on Equity (ROE)
- Management Efficiency: The company has delivered better ROE compared to its peers in the most recent four quarters, placing it in the top quartile. This reflects effective management in generating profits from shareholders’ equity.
Negative Fundamentals
- Overpriced Compared to Book Value
- Valuation: BlackRock is trading higher than its peers on a price-to-book value basis, indicating that the stock may be overvalued compared to its intrinsic worth.
- Overpriced Compared to Earnings
- P/E Ratio: The stock is trading higher than its peers on a price-to-earnings basis, suggesting that investors are paying a premium for each dollar of earnings.
- Below Median Total Returns
- Performance: Over the past five years, BlackRock has underperformed its peers in terms of annual average total returns, raising concerns about its long-term performance.
- High Volatility
- Risk: The total returns for BlackRock have been volatile and above the sector median over the past five years. Investors should ensure they have the risk tolerance for such volatility.
- Overpriced on Cash Flow Basis
- Valuation: The stock is trading high compared to its peers on a price-to-cash flow basis, suggesting that it might be overpriced relative to the cash flow it generates.
- Low Revenue Growth
- Growth: BlackRock has shown below median revenue growth in the previous five years compared to its sector, indicating slower expansion.
- Low Earnings Growth
- Profit Growth: The company has also shown below median earnings growth in the previous five years compared to its sector, suggesting slower profitability increases.
- Overpriced on Free Cash Flow Basis
- Valuation: The stock is trading high compared to its peers on a price-to-free cash flow basis, indicating that it might be overvalued relative to the free cash flow it generates.
Final Analysis
BlackRock Inc. exhibits several strong fundamental attributes, such as superior risk-adjusted returns, positive cash flow, high dividend returns, and superior capital utilization. These factors contribute to its attractiveness as a stable and profitable investment. However, the stock’s high valuation relative to its book value, earnings, and cash flow, coupled with below median revenue and earnings growth, suggest potential overpricing and slower growth prospects.
Investors should weigh these strengths and weaknesses carefully. While BlackRock remains a strong player in the investment management sector, considerations of its high valuation and growth challenges are crucial for making informed investment decisions.
