BlackRock, with the NYSE moniker BLK, is the globe’s most sizeable asset management firm and holds significant sway in Wall Street’s operations. Its commanding position attracts a mix of applause, scrutiny, and substantial earnings. However, over the past half-decade, contrary to expectations, BlackRock’s stock performance hasn’t knocked it out of the park.
The company’s shares failed to outdo the all-encompassing market encapsulated by the S&P 500 index during the same period. To be more precise, the S&P 500 saw a gain of 85.63%, in contrast to BLK’s 67.76% rise.
Jumping forward to 2024, the somewhat languid pace of the company’s stock continues, with shares dipping by around 3% as opposed to the S&P 500’s almost 14.5% YTD surge. But what occurs in the next five years might well alter this trajectory.
BlackRock’s fame is mainly due to its ownership of iShares, an assortment of exchange-traded funds, and managing other investment vehicles that aim to capture public market returns for individuals and institutional investors such as pension funds. But to rev up BlackRock’s stock, the company needs to build on this established base for continued success and growth.
BlackRock is several strides ahead in this regard. The firm is widening its horizon to include alternative asset classes like cryptocurrency and infrastructure. Starting 2024, the firm declared its intention to purchase Global Infrastructure Partners, channeling its attention toward the faster-growing asset management area.
BlackRock hasn’t restricted its vision to the alternative asset management area alone. The firm has also ventured into other financial services areas. The company is on its way to acquiring Preqin, a private markets data provider, and is one of the supporters of the proposed Texas Stock Exchange.
Given these positive influences and triggers, it’s easy to understand why financial analysts anticipate steady earnings growth for BlackRock in the coming years. The latest estimates project an earnings growth of 12.4% this year, 10.2% next year, and 17.6% in 2026 for the company.
Double-digit annualized earnings seem to be a consistent feature, hinting at BlackRock maintaining its current earnings multiple of around 19. This valuation outruns competitor State Street (NYSE:STT), but aligns with alternative asset manager MacQuarie Group’s (OTCMKTS:MCQEF) valuation.
By merely keeping its current multiple, BlackRock’s shares could climb in line with earnings growth. On this basis, BLK has a potent chance of reaching $1000 per share by 2026.
Possibly, this target may be achieved sooner. By overshooting analyst consensus, the earnings for 2025 could hit the upper prediction limit of $50 per share. In simple terms, a rally over 26.5% from the current price levels is entirely plausible for BlackRock shares in the forthcoming eighteen months. Its 2.59% dividend might further enhance the total returns.
While past performance often sets the stage, it’s not necessarily a reliable predictor for future returns with BlackRock. The company’s diversification strategy, hand in hand with the organic growth of its core business, could lay the foundation for heightened earnings growth rates. This could translate to considerably higher annualized gains in the next few years.
Moreover, BLK’s dividend could give a short-term total return boost, keeping in mind BlackRock’s 14-year history of dividend growth. On average, the dividend growth rate has been 9.45% annually in the past five years.
While it is unclear whether major indexes like the S&P 500, heavily skewed towards mega-cap tech stocks, will maintain delivering above-average returns, consider individual securities like BlackRock’s stocks that have the potential to outperform the market.
This article does not constitute financial advice. The writer, Thomas Niel, holds no positions, direct or indirect, in the securities discussed in this article. The views expressed here are those of the writer, following the Investing Pioneers Publishing Guidelines.
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