On Oct 7, 2016, we issued an updated research report on The Blackstone Group L.P. (BX - Analyst Report) . Despite the adverse effects of ongoing volatility in the capital market, elevated expenses and stringent regulations, Blackstone is well positioned to benefit from diversified products and revenue mix.
Blackstone enjoys a strong global presence, along with broad diversification and organic growth prospects. Further, revenue is expected to increase in the upcoming quarters due to better performance of the company’s funds. Moreover, management anticipates that the current dislocation in the credit markets and increased liquidity pressure will create investment opportunities for the company in future.
Blackstone’s total assets under management (AUM) and fee-earning AUM has been persistently growing, largely driven by the increasing inflows. Furthermore, the company’s diversified products, revenue mix and superior position in the alternative investments space will continue to aid AUM growth.
However, elevated operating expenses remain a matter of concern. Moreover, it is anticipated that once the top line growth of the company rebounds, expenses will rise further. Going forward, expenses are expected to increase owing to the company’s well performing funds that require more headcount.
Further, increased dependence on management and advisory fees can adversely affect the company’s financials in the near term, if it witnesses any change in the managed assets, regulations or a slowdown in business activities. Additionally, the asset management operations of the company largely depend upon commitment from investors of its alternative investment funds. Hence, any future crisis, along with impending regulatory changes, would adversely affect revenue growth and the company’s ability to generate cash flow.
Over the last 30 days, the Zacks Consensus Estimate has increased by 2.6% and 0.4% for 2016 and 2017, respectively.
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