On Wednesday, Deutsche Bank (ETR:DBKGn) maintained a Buy rating on Apollo Global Management (NYSE:NYSE:APO) and raised its price target from $141.00 to $155.00. The firm highlighted Apollo's continued delivery of solid Fee-Related Earnings (FRE) results and strong key performance indicators.
Apollo's fundraising and deployment activities were robust, and its origination platforms, particularly in debt-related areas, were significant contributors to differentiation, with a record $62 billion in the third quarter.
The analyst from Deutsche Bank noted that Apollo's strong origination capabilities are a key driver of growth across the company's businesses, including Capital Solutions revenue, which benefits from higher incremental margins. The firm also recognized that Apollo's Strategic Real Estate (SRE) results met expectations and that management's guidance for reported earnings of $3.2 billion in 2024 and $3.5 billion in 2025, as stated during the Investor Day, remains on track.
In terms of portfolio management, Apollo has taken steps to adjust its alternatives portfolio. Despite the expectation that achieving the long-term return target of 11% may take some time, the portfolio now has a greater focus on AAA-rated investments, which accounted for approximately 80% of the alternatives book post-adjustments. These AAA investments yielded a return of around 10.5% in the third quarter. The Deutsche Bank analyst anticipates that there should be less volatility in these returns going forward, in contrast to previous results.
Looking ahead, the analyst expressed a positive outlook on Apollo's future, citing trending key performance indicators on the FRE side that suggest potential for continued growth. The strength in deployment and origination is expected to support this growth across Apollo's platform.
The raised price target to $155 is supported by an increased 3-year FRE compound annual growth rate (CAGR) projection for 2023-2026, now estimated at 24.2%, up from the previous estimate of 21.9%.
In other recent news, Apollo Global Management has been the focus of positive analyst attention following a robust third quarter. Citi maintained its Buy rating on the company and raised its price target to $170, up from $162. This adjustment was influenced by the strong performance in Apollo's Strategic Real Estate (SRE) segment, which exceeded expectations. Citi also revised its earnings per share estimates for Apollo upwards, reflecting better-than-expected flow trends in both the asset management and retirement solutions segments.
In the same vein, Apollo reported record fee-related earnings (FRE) of $531 million and strong spread-related earnings (SRE) of $856 million for the third quarter. The company's adjusted net income reached a notable $1.1 billion. Looking ahead, Apollo has set ambitious targets for the next five years, including significant growth in FRE and SRE, and a doubling of adjusted net income.
These recent developments suggest a continued positive trajectory for Apollo Global Management. The company aims for both FRE and SRE to reach $10 billion by 2029, with adjusted net income doubling to $15 per share. Apollo's focus on expansion opportunities in retirement services and Principal Warranty and Collateral (PWC), coupled with a distinguished origination platform, further underscores this growth potential.
InvestingPro Insights
Apollo Global Management's recent performance aligns with Deutsche Bank's positive outlook. InvestingPro data shows that Apollo's revenue growth has been impressive, with a 20.81% increase over the last twelve months as of Q3 2024, and a remarkable 285.13% quarterly growth in Q3 2024. This robust growth supports the analyst's observations on Apollo's strong origination capabilities and solid Fee-Related Earnings results.
The company's profitability is also noteworthy, with a P/E ratio of 14.79 and an adjusted P/E ratio of 14.47 for the last twelve months as of Q3 2024. These figures suggest that Apollo is trading at a reasonable valuation relative to its earnings, which is further supported by an InvestingPro Tip indicating that the company is "Trading at a low P/E ratio relative to near-term earnings growth."
Another InvestingPro Tip highlights that Apollo has "maintained dividend payments for 14 consecutive years," which speaks to the company's financial stability and commitment to shareholder returns. This aligns with the positive outlook on Apollo's future growth potential mentioned in the article.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips for Apollo Global Management, providing a deeper understanding of the company's financial health and market position.
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