Is BlackRock Stock Undervalued?

BLK: BlackRock logo

BlackRock stock (NYSE: BLK) has lost 19% YTD as compared to the 10% drop in the S&P500 index. Further, it is currently trading around $732 per share and has a potential upside of 26% to its fair value of $920 – Trefis’ estimate for BlackRock’s valuationThe asset management behemoth recently released its fourth-quarter results, topping the earnings estimates but missing the revenue expectations. It posted total revenues of $5.1 billion – up 14% y-o-y. The improvement was due to a 17% increase in total investment advisory, administration fees, and securities lending revenue (base fees) coupled with a significant jump in distribution fees. The base fees benefited from a 30% rise in revenue from the equity investments category. Further, the company reported $212 billion in total net fund inflows for the quarter. On the flip side, the company’s operating margin reduced from 41.3% to 39.9% in Q4, somewhat diluting the positive effect of higher revenues. It translated into a net income of $1.6 billion – up 6% y-o-y.

The company witnessed strong growth in FY2021. It reported total revenues of $19.4 billion, which is 20% more than the 2020 level. The growth was primarily due to a 21% y-o-y growth in the base fees, driven by a 36% jump in the revenues from equity investments. The firm’s average Assets under Management (AuM) increased 24% y-o-y to $9.4 trillion, with net fund inflows of $539.7 billion in the year. Further, the operating expenses as a % of revenues saw a favorable decrease, leading to improvement in operating margin from 35.1% to 38.5%. This  resulted in a net income of $5.9 billion – up 20% y-o-y. 

Going forward, we expect the AuM to continue its growth trajectory, enabling BlackRock’s revenues to touch $21.2 billion in FY2022. Also, the operating margin is likely to remain around the current levels. It will lead to a net income of around $6.4 billion and an annual EPS of $42.31 in the year, which coupled with a P/E multiple of 22x will lead to the valuation of $920.

Relevant Articles
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  2. Rising 24% In The Last Six Months, How Will BlackRock Stock Trend After 2024 Q1 Results?
  3. Up 10% Since The Beginning Of 2023, What Should You Expect From BlackRock Stock?
  4. Up 10% In The Last Six Months, Does BlackRock Stock Have More Room For Gains?
  5. Will BlackRock Stock Top The Estimates In Q3?
  6. BlackRock Stock Topped The Earnings Consensus In Q2

Here you’ll find our previous coverage of BlackRock stock, where you can track our view over time.

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 Returns Feb 2022
MTD [1]
YTD [1]
Total [2]
 BLK Return -11% -20% 92%
 S&P 500 Return -6% -11% 89%
 Trefis MS Portfolio Return -5% -14% 239%

[1] Month-to-date and year-to-date as of 2/24/2022
[2] Cumulative total returns since the end of 2016


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