On Thursday, Evercore ISI announced a price target increase for Blue Owl Capital (NYSE: OWL) shares to $22.00, up from $18.00, while maintaining an Outperform rating.
The adjustment follows Blue Owl Capital's recent acquisition of KAM, which adds $20 billion in fixed income assets under management (AUM) to the firm. The purchase price could reach $1 billion, including the earn-out.
The acquisition is expected to be immediately accretive to earnings, with an estimated increase of around 4%. This move aligns with Blue Owl's business strategy, which emphasizes permanent capital and fully realized fee-related earnings (FRE). The addition of KAM expands Blue Owl's range of investment capabilities, which includes significant portions in private credit, CLOs, investment-grade corporates, and asset-backed securities (ABS).
Blue Owl's approach to entering the insurance sector is designed to be capital-efficient, avoiding the ownership of liabilities, similar to Blackstone (NYSE:BX)'s model, and distinct from the strategies of Apollo or KKR. The expectation is that this strategy will aid in stabilizing capital-raising cycles and support the growth of FRE.
The market responded positively to the news, with Blue Owl's stock price experiencing a 6% increase during intraday trading. The entry into the insurance channel is seen as a beneficial expansion for Blue Owl, offering a new growth avenue.
The firm also formed a strategic alliance with Kuvare, which will provide Blue Owl with $3 billion in general account assets to invest across its various investment segments. Moreover, the deal includes a $250 million double-digit coupon preferred.
While the acquisition does not cover all aspects of the asset-backed space and includes some commercial real estate (CRE) and mortgage-backed securities (MBS), the transaction is viewed favorably. Blue Owl has existing real estate operations and has conducted third-party reviews of the book. The firm's strategic move into a growing sector with a $1 billion investment is considered a positive step for the $28 billion company.
InvestingPro Insights
Blue Owl Capital's strategic acquisition and expansion into the insurance sector have caught the attention of investors and analysts alike. To further understand the company's current financial health and potential for growth, we turn to real-time data from InvestingPro. Blue Owl Capital boasts a robust market capitalization of $21.55 billion, reflecting investor confidence and the scale of the business. Notably, the company's revenue has grown significantly, with a 26.42% increase over the last twelve months as of Q1 2023. This growth is consistent with the company's recent moves to expand its asset management capabilities.
InvestingPro Tips highlight that Blue Owl Capital has a history of raising its dividend, with a 16.67% growth in dividends over the last year, signaling a commitment to shareholder returns. Additionally, the company is expected to see net income growth this year, which could further bolster investor sentiment. With a high Price / Book multiple of 14.1, the company is trading at a premium, likely due to its strong performance and strategic initiatives.
Investors interested in deeper analysis and more InvestingPro Tips can explore additional insights on Blue Owl Capital by visiting https://www.investing.com/pro/OWL. There, you'll find a comprehensive list of 13 InvestingPro Tips, offering a more detailed perspective on the company's financials and market position. To enhance your investment research on Blue Owl Capital, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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