BlackRock (BLK) is one of the leading investment management companies in the US, best known for its expertise in fixed income asset management. The firm had more than $9 trillion in assets under management (AUM) as of June 30, and we think it will continue to gain market share, aided by its significant scale and strong reputation in the marketplace, writes Cathy Seifert, analyst at CFRA Research.

Our “Buy” recommendation reflects our view that BLK’s top-tier position in passive investments and strong fund performance will attract assets at above-industry-average rates over the next few years, despite competitive pressures and secular challenges within the asset management industry.

We also see healthy growth potential from equity and fixed income ETFs as well as alternative style funds, which will likely enhance BLK’s asset inflows as new funds gain traction.

BlackRock (BLK)
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In addition, we are encouraged by the potential of the small but growing Aladdin risk management platform, and see this capability as a factor in widening BLK’s competitive moat versus peers.

Our 12-month target of $822 is 20x our 2024 operating EPS estimate of $41.03 and 22.8x our 2023 operating EPS estimate of $36.11, versus BLK’s three-year average forward multiple of 20x, but above the peer average of 13x and supported, we think, by BLK’s consistent, above-peer organic growth metrics and the increased competitive advantage BLK continues to build, aided by its technology division.

We project a 2023 GAAP operating margin of 35%-38%, rising to 40.5% in 2024, versus the 35.7% reported in 2022. Risks to our opinion and target price include depreciating securities markets and adverse regulatory changes.

Recommended Action: Buy BLK.

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