Investing.com -- GCM Grosvenor's (NASDAQ:GCMG) shares rose in pre-market trading on Monday after analysts at Piper Sandler upgraded the stock to "overweight" from "neutral."
The brokerage cited an improving environment for alternative asset managers and an undervaluation in GCMG's stock price as key reasons for the revision.
The brokerage noted a shift in sentiment within the alternatives investment space, driven by factors such as expected momentum in fundraising, growth in direct investments, and a potential surge in deal activity.
Piper Sandler increased GCMG's price target to $14 from $12.50, based on a valuation of 18 times the estimated 2025 earnings. This still reflects a discount compared to peers, which trade at higher multiples, making GCMG an attractive option for investors.
According to the analysts, upcoming quarters may see GCMG benefiting from a combination of factors: a more accommodative regulatory environment, the Federal Reserve's rate-cutting cycle, and a generally pro-growth economic backdrop.
Additionally, the firm holds substantial unrealized carried interest that could materialize as performance revenues in the near future.
Fundraising performance is also expected to be robust, with projections for the fourth quarter of 2024 at $2.1 billion—its highest since the third quarter of 2022.
This optimistic outlook comes amid broader tailwinds for the asset management sector. Analysts highlighted a pickup in deal activity, a lighter regulatory burden, and increasing capital allocation to alternative investments by private wealth and insurance sectors.
GCM Grosvenor's positioning in this evolving market environment was a decisive factor in Piper Sandler's upgrade.
The upgrade reflects an improved outlook for GCMG's growth potential in 2025, supported by macroeconomic conditions that are expected to drive increased transactional activity and performance revenue growth.