Although Blue Owl Capital Inc.’s (NYSE:OWL) stock has been underperforming, the company enjoys a high-growth, high-margin and capital-light business, according to BofA Securities.
The Blue Owl Capital Analyst: Craig Siegenthaler initiated coverage of Blue Owl Capital with a Buy rating and a price target of $18.
The Blue Owl Capital Thesis: The company offers a 3% dividend yield, and its incremental operating margins are more than 60%, Siegenthaler said in the initiation note.
He added that there is high visibility into Blue Owl Capital’s “strong earnings growth in 2022-'23 due to:
- Dyal VI raise
- Multiple planned BDC (business development company) raises
- $9 billion of shadow assets under management, which translates into $140 million in management fees
- Management has indicated that the company’s incremental management fees would go to $65 million if the technology BDC were to go public
- Incremental inflows from the Oak Street acquisition
“OWL’s management fees are insulated from redemptions and we see limited downside risk to EPS across macroeconomic scenarios,” the analyst wrote.
“We also believe the recent pullback in the stock was unwarranted based on our growth/profit forecasts but it did create a particularly attractive buying opportunity for investors,” Siegenthaler further mentioned.
OWL Price Action: Shares are down 2.58% at $11.89 a share, Monday morning at publication.
Photo by Erik Karits on Unsplash
