BlackRock (BLK) provides investment management, risk management, and advisory services for institutional and retail clients worldwide, explains Stephen Biggar, with Argus Research — a leading independent Wall Street research firm.

Its range of products includes separate accounts, mutual funds, the iShares franchise of ETFs, and other pooled investment vehicles. Assets under management were $9.5 trillion as of June 30 2021.

iShares, historically the fastest-growing segment, is expected to benefit from product expansion and market share gains. In 2Q21, iShares ETFs saw net inflows of $75.1 billion, including $51.4 billion into equities.

On July 14, BlackRock reported 2Q21 adjusted earnings of $10.03 per share, up from $7.85 a year earlier and above the $9.36 consensus. Revenue rose 32% as average AUM hit $9.3 trillion.

BlackRock has generally seen long-term inflows in a wide variety of market environments. We believe that these inflows reflect the company’s strong diversification across product lines. Long-term net inflows were more modest than the past four quarter average, but still strong historically, at $59.7 billion.

BlackRock is targeting double-digit EPS growth, reflecting both the increasing scale of the business and the impact of share buybacks. Based on a better outlook for AUM, we are raising our 2021 EPS estimate to $39.08 from $36.70, and our 2022 forecast to $45.51 from $41.93.

BlackRock’s recent Investor Day focused on maintaining or improving its market position in high-growth markets and on leveraging its scale and technology. Management noted “illiquid alternatives” as a potential new growth driver and also expects strong growth in its cash management business.

On valuation, we believe that BLK should trade at a premium to large-cap financial stocks given the company’s above-average operating margins, stable long-term asset inflows, and history of product innovation. Our target of $975 (raised from $950) assumes a multiple of 25-times our 2021 EPS estimate.

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