BlackRock Inc (BLK) is the largest asset manager in the world, with total assets under management (AUM) of $10 trillion in 2023, up from $8.6 trillion in 2022. It offers multiple investment products, such as mutual funds, index funds, advisory solutions, exchange-traded funds (ETFs), and alternative investments.
Valued at $124.5 billion by market cap, BlackRock has returned close to 250% in the past decade, after adjusting for dividends. In the last six months, the stock has gained 18.5%, primarily due to surging demand for spot bitcoin (BTCUSD) ETFs.
Multiple spot bitcoin ETFs were launched in January 2024, attracting billions of dollars in funds from investors. Now, there is a good chance the SEC will approve spot Ethereum (ETHUSD) ETFs later this year, as well, acting as a key driver for BlackRock stock in the near term.
Let’s see if it makes sense to buy and hold BlackRock stock at the current valuation.
Crypto ETFs Attract Investor Inflows
The BlackRock iShares Bitcoin ETF (IBIT) was launched two months ago, and the fund already holds 195,985 BTC, according to a report from CoinDesk - topping the massive amount of BTC held by MicroStrategy (MSTR). Today, the total value of the fund's Bitcoin holdings has surpassed $14 billion, given that the digital asset just touched a new all-time high.
BlackRock’s IBIT ETF has attracted billions of dollars in funds, and is the second-largest Bitcoin ETF in the U.S. The largest is still the Grayscale Bitcoin Trust (GBTC), which holds roughly 400,000 tokens.
Significant capital inflows have driven BTC prices to more than $72,000 at the time of this writing. Since the start of 2024, BTC prices have surged over 63%, and they have more than tripled in the last 12 months.
BlackRock's IBIT fund has an expense ratio of 0.25%, which means it will earn $2.5 million for every $1 billion invested in the fund. Ethereum ETFs are likely to gain popularity among crypto investors as well, unlocking another high-margin revenue stream for the investment giant.
While the SEC has extended the date to decide on approval for spot Ethereum ETFs, the final deadline is on May 23, by when approval is anticipated.
Is BlackRock Stock Undervalued?
Analysts tracking BLK stock expect sales to rise from $17.9 billion in 2023 to $22.45 billion in 2025. Its adjusted earnings per share are forecast to expand from $37.77 to $45.74 over this period. Priced at 18.3 times forward earnings, BLK stock is reasonably valued, given its earnings are forecast to expand by 12.2% annually in the next five years.
Further, BlackRock pays shareholders a quarterly dividend of $5.10 per share, indicating a forward yield of 2.44%. These payouts have risen by 16.3% annually in the last 20 years, which is exceptional for an asset manager.
Out of the 16 analysts covering BLK stock, 12 recommend “strong buy,” two recommend “moderate buy,” and two recommend “hold.” The average target price for BLK is $901.87, indicating an upside potential of less than 10% from current levels, while the Street-high price target is $1,025 - a premium of 24.1%.
BlackRock is forecast to end 2028 with adjusted earnings of $67 per share. If the stock is priced at 18x forward earnings, it should surge to $1,200 in the next four years.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
