How High Will Blackrock Stock Go?

BlackRock, Inc. (NYSE:BLK) has the hallmarks of being just one among many financial giants but under the hood is a powerhouse with enormous clout and an astonishing $10 trillion under management.

BlackRock is at the epicenter of major economic trends from the shift to sustainable investing to the rise of ETFs through its flagship iShares brand but what most sets it apart is not its size but its technological edge through its Aladdin platform, which offers clients unparalleled risk management and portfolio analytics capabilities.

We lift the veil on why BlackRock’s broad revenue streams and technological moat make it an essential stock for forward-looking investors looking to ride the coattails of the global asset management market that is forecast to grow at a CAGR of 35.4% between 2024 and 2033.

How Has BlackRock Performed Over the Years?

Blackrock is a titan of finance now but it began humbly as an eight-person startup over 30 years ago, and since become the largest name among global fund managers or its competitors like the Vanguard Group and The Charles Schwab Corporation (NYSE:SCHW).

BlackRock has an eye-popping $10.40 trillion in average assets under management, making it the largest name in the game.

In its long operating history, CEO Larry Fink has made some very crucial decisions to stay ahead of the competition, not least in 1999 with the commercial launch of its proprietary technology, Aladdin.

You can think of Aladdin as being akin to a high-tech assistant for investment management because it analyzes massive amounts of data to help financial professionals make smarter decisions about where to invest money.

Aladdin is especially well-trained in identifying risks, such as investments that might lose value, and helps create strategies to protect and grow portfolios. Big institutions like banks, insurance companies, and even governments rely on it extensively to manage trillions of dollars.

So you can think of it as a combination of a financial advisor, risk manager, and data analyst all rolled into one powerful system.

In 2009, BlackRock purchased Barclays PLC’s (NYSE:BCS) Barclay’s Global Investors (BGI) in a huge deal worth $13.5 billion, creating the world’s largest asset manager. In fact, the acquisition more than doubled BlackRock’s asset base.

This also gave the company access to retail investors and a foray into exchange-traded funds or ETFs and ownership of Barclays’ iShares unit. At that point in time in 2009, ETFs were not as big as they are now, so BlackRock’s deal was seen as somewhat of a gamble.

When the deal was made, there were roughly $700 billion in total assets under management in ETFs, which was meager compared to assets in mutual funds. BlackRock struck gold as the ETF field is still growing, leading to higher revenues, AUM, and net flows.

The company’s growth via acquisitions didn’t not stop there and, in 2019, BlackRock acquired eFront to provide end-to-end alternative investment management software and solutions.

How Has BlackRock’s Growth Been Recently?

Over the past five years, BlackRock’s fortunes have been following the ebbs and flows of the market, at least judging from its AUM and net flows.

Last year, for the fiscal 2023 that ended in December, AUM climbed by 16% from the prior year to over $10 trillion. It generated $288.70 billion in total net flows. Revenues were roughly flat compared to fiscal 2022 at $17.86 billion.

More recently, AUM has climbed beyond the $10.60 trillion mark, indicating a year-over-year growth of 13% from the prior year’s period. Total net flows for the quarter stood at $81.57 billion. This resulted in a 3% organic base fee growth. This time, revenue also climbed in tandem and increased by 8% from the year-ago value to $4.81 billion.

Larry Fink, BlackRock’s Chairman and CEO, highlighted that the company is organically growing due to the strength in private markets, retail active fixed income, and strong ETF inflows.

Does BlackRock Pay a Dividend?

Blackrock has paid a longstanding dividend and over the past two decades payouts have largely grown.

In 2003, BlackRock paid $0.40 per share as dividends, while in 2023, this figure stood at $20.00 per share.

The company’s board last declared a quarterly dividend of $5.10 per share and the quarterly rate reflects a $0.10 per share increase, translating to an annual rate of $20.40 per share, yielding 2.00% on the prevailing price level.

It has a payout ratio of 50.2%, which is reasonable and suggests there are no concerns about the sustainability of the dividend over time.

How High Can BlackRock Stock Go?

Blackrock stock is covered by 17 analysts who collectively have a $1,089 fair value price target on the stock. Less optimistic is a discounted cash flow forecast that puts the intrinsic value of Blackrock closer to $990 per share.

So what could move the needs for the firm? Well, this year, BlackRock made another big-budget purchase, this time of $12 billion in cash and stock, by buying Global Infrastructure Partners (GIP).

Fink and his team see long-term opportunities in infrastructure, shifting its focus toward the sector. Indeed, the GIP acquisition is expected to create a combined infrastructure platform of over $150 billion. It is also set to embed its ETF and Index businesses across the entire firm with the creation of a new strategic Global Product Solutions business.

BlackRock also acquired Preqin, a leading private market data provider, for $3.2 billion in cash. This acquisition is highly accretive to the Aladdin business. Private markets are another focus of the company and are a highly lucrative segment that is among the fastest-growing in the asset management industry.

On the other hand, the company is trying to expand into the annuities business through the LifePath Paycheck Program. It remains to be seen what becomes of this venture, as annuities are conventionally characterized by low payouts and high commissions. At the moment, the price sits at 21.51x its forward non-GAAP earnings, which is a bit higher than the current industry standards.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.