BlackRock’s stock (NYSE: BLK) has lost 30% YTD as compared to the 16% drop in the S&P500 index over the same period. Further, at its current price of $639 per share, the stock is trading 28% below its fair value of $693 – Trefis’ estimate for BlackRock’s valuation. The world’s largest asset manager missed the consensus estimates of revenues and earnings in the recently released second-quarter results. It posted total revenues of $4.53 billion – down 6% y-o-y. It was mainly due to a 2% decline in the total investment advisory, administration fees & securities lending revenue (base fees), followed by a 69% decrease in the performance fees. The base fees mainly suffered due to lower market valuations and the negative impact of foreign exchange movements on average assets under management (AuM). Similarly, the performance fee was down due to lower revenue from alternative and long-only products. In addition to this, the company’s total AuM fell by 15% from $10 trillion at the end of Q4 2021 to $8.5 trillion at the end of Q2 2022. However, it did report $90 billion of quarterly net inflows. Overall, the adjusted net income decreased 22% y-o-y to $1.07 billion.
The company’s top line grew 20% y-o-y to $19.4 billion in 2021, primarily driven by strong growth in the equity investment category and total client assets. However, the momentum has somewhat changed in 2022. Notably, total revenues for the first half of 2022 were at the level as the previous year, while the adjusted net income was marginally lower. It was mainly because of lower asset valuations due to the market correction.
The recent stock market turmoil in 2022 was due to record-high inflation figures, aggressive interest rate hikes by the Federal Reserve, and the geopolitical crisis. Moving forward, we expect the asset valuation to continue to suffer in the subsequent quarters, hurting the revenue growth rate. Overall, BlackRock revenues are estimated to remain around $18.6 billion in FY2022. Additionally, BLK’s adjusted net income margin is likely to see a slight drop in the year, leading to an adjusted net income of $5 billion and an annual EPS of $33.07. This coupled with a P/E multiple of 21x will lead to the valuation of $693.
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With inflation rising and the Fed raising interest rates, BlackRock has fallen 31% this year. Can it drop more? See how low can BlackRock stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||6%||-16%||79%|
|Trefis Multi-Strategy Portfolio||12%||-14%||242%|
 Month-to-date and year-to-date as of 7/22/2022
 Cumulative total returns since the end of 2016
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