With a large suite of ETF offerings as well as a diversified base of private investments and real estate holdings, BlackRock (NYSE:BLK) manages trillions of dollars and is one of the largest forces in the US investment world.
Let’s take a look at BlackRock to see if its stock is a buy, sell or hold in today’s highly volatile market.
Digging Into BlackRock’s Rising Top Line
In its recent Q1 report, BlackRock detailed quarterly revenue growth of 12% to $5.28 billion, including a 16% gain in technology services and subscription revenue. Total assets under management grew 11% to $11.58 trillion.
For reference, this means that the assets managed by BlackRock at the end of Q1 were equivalent to more than one-third of the United States’ entire 2024 GDP.
In terms of earnings, adjusted EPS rose 15% year-over-year to a quarterly total of $11.30. Earnings per share at BlackRock have been moving steadily upward for well over a decade as investment products gained popularity.
The outlook for the next 3-5 years suggests ongoing EPS growth at an annualized rate of around 7.3%. While not an explosive growth rate by any means, this kind of gradual increase in the company’s earnings will likely favor long-term shareholders.
Is BLK Undervalued?
Currently trading under $900 per share, BlackRock shares have come significantly off of their 52-week high of $1,084.22. That doesn’t necessarily mean that the stock has become a bargain.
At 21.6x earnings, 6.5x sales and 2.9x book value, the stock doesn’t exactly look cheap. Many large financial companies are trading at comparable or higher multiples. Charles Schwab (NYSE:SCHW), for instance, trades at 25.8x earnings, 7.2x sales and 3.6x book.
Given that the market is still pricing in the effects of uncertain tariff policies and potential rate cuts, it’s very possible that BLK will miss this target over the next 12 months.
With that said, the long-term value of Larry Fink’s firm still seems at least fair based on both its potential for sustained growth and entrenched competitive position.
BlackRock’s Dividend Growth Prospects
Like most financial majors, BlackRock offers investors an attractively high dividend yield. In BLK’s case, the yield is currently 2.3% or $20.40 per share annually.
Though this yield is appealing in its own right, BlackRock’s real selling point in this area is future dividend growth. The payout ratio at the moment is just 36.6%, leaving management a great deal of latitude when it comes to raising the payout in the future.
The Board has been hiking the dividend annually for 15 years straight, and the annualized growth rate over the trailing 10-year period has been 9.9%.
BlackRock also has a steady share buyback program. In Q1, it bought back $375 million of its own shares.
The total number of BLK shares has also been trending gradually downward for years, concentrating the ownership of shareholders who choose to retain their stock. If BlackRock keeps this trend up, it will support higher earnings per share and, by extension, higher share prices going forward if multiples remain the same.
BlackRock’s Risk Outlook
In the short term, BlackRock may see some pressure on its assets under management from both market declines and investor wariness.
In Q1, active equity holdings saw modest net outflows and lost $12.98 billion due to negative market changes.
Fixed-income products were also hit by outflows to the tune of $7.33 billion.
In the ETF part of Blackrock’s portfolio, positive inflows still prevailed, but market changes imposed a loss of over $68 billion on the asset base.
Given that these numbers only cover the period through March 31st and don’t include the extreme market volatility produced by tariff policy in the early weeks of April, it’s possible that these trends will show up much more strongly in Q2’s reporting.
The massive ETF portfolio is also almost inevitably suffering and will do so in the long run if stagflation really takes hold as some analysts expect.
With that said, this risk is likely a temporary worry. BlackRock is still the world’s largest asset manager, and the portfolio is well-diversified enough to largely mitigate the problems of stock market volatility. Though a weaker economic outlook ahead could bode poorly for the company’s holdings, it doesn’t seem that BlackRock is at any severe risk of disruption or permanent damage to its business.
Indeed, BlackRock CEO Larry Fink discussed some of these broad macroeconomic risks directly in an interview with CNBC last week. Fink sounded the alarm bell on a potential recession, sharing his view that the US is either already at the outset of one or very close. In Fink’s opinion, though, larger growth trends are likely to continue in the long run, and the US isn’t at the beginning of a general financial crisis.
Is BlackRock a Buy, Sell or Hold
The average target price of $1,033.91 based on analyst price forecasts is about 16.4% higher than the current trading price and a bit below the 52-week high
Despite short-term pressures, BlackRock has solid investment potential for buy-and-hold investors looking for a combination of competitive advantage, growth potential and decent dividend income.
Even if the returns from BLK don’t stack up quickly, the company’s dominance in its field and massive base of assets under management give it a significant leg up.
BlackRock’s technological developments are especially worth taking note of. The infamous Aladdin platform, which helped to drive its outsized Q1 technology and subscription revenue growth, is a well-proven investment and risk management software.
Counting both BlackRock’s AUM and those of various institutional investors and pension funds that use it, Aladdin manages well over $20 trillion in total. Persistent growth from providing software solutions to other businesses may very well help to pad out BlackRock’s revenue and keep the company growing well into the future.
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.