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BlackRock Stock Touches 2-Year High: Should You Still Invest?
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BlackRock Inc.’s (BLK - Free Report) shares touched a two-year high of $942.84 in yesterday’s trading session. Over the past three months, the stock has rallied 19.9%, outperforming the industry, the S&P 500 Index, and its close peers — Ameriprise Financial, Inc. (AMP - Free Report) and Invesco Ltd. (IVZ - Free Report) .
Three-Month Price Performance
Image Source: Zacks Investment Research
Does BLK stock have more upside left despite hitting a two-year high? Let’s try to decipher that.
Factors Likely to Drive BlackRock Stock Higher
Fed’s Rate Cuts to Further Aid Financials: The Federal Reserve initiated a 50-basis point interest rate cut on Sept. 18 and signaled further rate cuts this year and in 2025. The move complements BlackRock’s organic growth strategy to grow its assets under management (AUM) through diversified offerings and a strong revenue mix.
BLK’s AUM growth is anticipated to be driven by investors' demand for higher returns as they move toward higher-yielding assets such as equity and alternative assets. Further, improved market liquidity will introduce new investors to the market, complementing AUM growth.
BlackRock’s AUM and total revenues witnessed a 10.9% and 4.7% compound annual growth rate (CAGR), respectively, over the five years ended 2023. The uptrend for both metrics continued during the first half of 2024.
The momentum will likely be sustained given the company’s efforts to solidify iShares and exchange-traded funds (ETF) operations as it received approval for spot bitcoin ETF in January 2024. Further, an enhanced focus on the active equity business will offer support as well.
Sales Estimates
Image Source: Zacks Investment Research
Strategic Acquisitions & Expansion Efforts: BlackRock has been primarily expanding via acquisitions – both domestically as well as globally. Earlier this month, the company entered into an alliance with Microsoft Corp., Global Infrastructure Partners (“GIP”) and MGX, collectively named Global AI Infrastructure Investment Partnership (“GAIIP”) to make the infrastructural investment required to build enhanced AI capabilities.
Similarly, BLK collaborated with Partners Group to introduce a multi-private market model solution, boosting retail investors’ accessibility to alternative investments.
Further, in June, the company agreed to acquire Preqin for $3.2 billion to boost its private market capabilities by integrating investments, technology, and data across the entire portfolio. In May, BlackRock acquired the remaining 75% stake in SpiderRock to enhance its separately managed accounts offerings.
Also, this January, BLK agreed to acquire GIP which is expected to be completed on Oct. 1, 2024, while it took over London-based Kreos Capital in 2023. Additionally, the company agreed to establish a joint venture with Jio Financial Services Limited, named Jio BlackRock.
These initiatives are expected to further strengthen BlackRock’s footprint and gain market share.
Impressive Capital Distributions: As of June 30, 2024, BLK had borrowings of $9.9 billion while Its cash and cash equivalents were $10.2 billion. This indicates balance sheet strength and a decent liquidity position.
This January, the company announced a 2% hike in the quarterly dividend to $5.10 per share. BLK has increased its dividend five times in the last five years with an annualized dividend growth rate of 10.7%.
Also, the company has a 50% payout ratio while its peers AMP and IVZ have 18% and 52% payout, respectively.
Dividend Yield
Image Source: Zacks Investment Research
Also, BlackRock has a share repurchase plan in place. The buyback program was announced in July 2010 and authorized the company to repurchase 5.1 million shares. This was further complemented by an additional 7 million authorization announced in January 2023. As of June 30, 2024, roughly 4.6 million shares remained available under the authorization.
On the back of decent liquidity and a strong balance sheet position, BlackRock is expected to sustain efficient capital distribution.
Bullish Analyst Sentiments for BLK
Over the past month, the Zacks Consensus Estimate for earnings of $41.37 and $45.92 per share for 2024 and 2025, respectively, has moved marginally upward. These metrics imply growth of 9.5% for this year and 11% for 2025.
Estimate Revision Trend
Image Source: Zacks Investment Research
Parting Thoughts on BLK Stock
BlackRock’s strong balance sheet, solid AUM balance, strategic expansion and collaborative efforts provide a strong foundation for growth. Moreover, the Fed’s decision to implement rate cuts will further reinforce the company’s efforts to improve its AUM through product diversification.
Thus, given the fundamental strength and favorable macroeconomic dynamics, BLK stock remains a lucrative bet for investors now despite it touching a two-year high.
Image: Bigstock
BlackRock Stock Touches 2-Year High: Should You Still Invest?
BlackRock Inc.’s (BLK - Free Report) shares touched a two-year high of $942.84 in yesterday’s trading session. Over the past three months, the stock has rallied 19.9%, outperforming the industry, the S&P 500 Index, and its close peers — Ameriprise Financial, Inc. (AMP - Free Report) and Invesco Ltd. (IVZ - Free Report) .
Three-Month Price Performance
Image Source: Zacks Investment Research
Does BLK stock have more upside left despite hitting a two-year high? Let’s try to decipher that.
Factors Likely to Drive BlackRock Stock Higher
Fed’s Rate Cuts to Further Aid Financials: The Federal Reserve initiated a 50-basis point interest rate cut on Sept. 18 and signaled further rate cuts this year and in 2025. The move complements BlackRock’s organic growth strategy to grow its assets under management (AUM) through diversified offerings and a strong revenue mix.
BLK’s AUM growth is anticipated to be driven by investors' demand for higher returns as they move toward higher-yielding assets such as equity and alternative assets. Further, improved market liquidity will introduce new investors to the market, complementing AUM growth.
BlackRock’s AUM and total revenues witnessed a 10.9% and 4.7% compound annual growth rate (CAGR), respectively, over the five years ended 2023. The uptrend for both metrics continued during the first half of 2024.
The momentum will likely be sustained given the company’s efforts to solidify iShares and exchange-traded funds (ETF) operations as it received approval for spot bitcoin ETF in January 2024. Further, an enhanced focus on the active equity business will offer support as well.
Sales Estimates
Image Source: Zacks Investment Research
Strategic Acquisitions & Expansion Efforts: BlackRock has been primarily expanding via acquisitions – both domestically as well as globally. Earlier this month, the company entered into an alliance with Microsoft Corp., Global Infrastructure Partners (“GIP”) and MGX, collectively named Global AI Infrastructure Investment Partnership (“GAIIP”) to make the infrastructural investment required to build enhanced AI capabilities.
Similarly, BLK collaborated with Partners Group to introduce a multi-private market model solution, boosting retail investors’ accessibility to alternative investments.
Further, in June, the company agreed to acquire Preqin for $3.2 billion to boost its private market capabilities by integrating investments, technology, and data across the entire portfolio. In May, BlackRock acquired the remaining 75% stake in SpiderRock to enhance its separately managed accounts offerings.
Also, this January, BLK agreed to acquire GIP which is expected to be completed on Oct. 1, 2024, while it took over London-based Kreos Capital in 2023. Additionally, the company agreed to establish a joint venture with Jio Financial Services Limited, named Jio BlackRock.
These initiatives are expected to further strengthen BlackRock’s footprint and gain market share.
Impressive Capital Distributions: As of June 30, 2024, BLK had borrowings of $9.9 billion while Its cash and cash equivalents were $10.2 billion. This indicates balance sheet strength and a decent liquidity position.
This January, the company announced a 2% hike in the quarterly dividend to $5.10 per share. BLK has increased its dividend five times in the last five years with an annualized dividend growth rate of 10.7%.
Also, the company has a 50% payout ratio while its peers AMP and IVZ have 18% and 52% payout, respectively.
Dividend Yield
Image Source: Zacks Investment Research
Also, BlackRock has a share repurchase plan in place. The buyback program was announced in July 2010 and authorized the company to repurchase 5.1 million shares. This was further complemented by an additional 7 million authorization announced in January 2023. As of June 30, 2024, roughly 4.6 million shares remained available under the authorization.
On the back of decent liquidity and a strong balance sheet position, BlackRock is expected to sustain efficient capital distribution.
Bullish Analyst Sentiments for BLK
Over the past month, the Zacks Consensus Estimate for earnings of $41.37 and $45.92 per share for 2024 and 2025, respectively, has moved marginally upward. These metrics imply growth of 9.5% for this year and 11% for 2025.
Estimate Revision Trend
Image Source: Zacks Investment Research
Parting Thoughts on BLK Stock
BlackRock’s strong balance sheet, solid AUM balance, strategic expansion and collaborative efforts provide a strong foundation for growth. Moreover, the Fed’s decision to implement rate cuts will further reinforce the company’s efforts to improve its AUM through product diversification.
Thus, given the fundamental strength and favorable macroeconomic dynamics, BLK stock remains a lucrative bet for investors now despite it touching a two-year high.
BLK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.