Raising BlackRock's FVE on Improved Long-Term Forecasts

Having taken a deeper look at our long-term projections for wide-moat-rated BlackRock BLK following the company's release of third-quarter earnings, we've raised our fair value estimate to $910 per share from $880. Most of the improvement came from adjustments to our longer-term forecasts for the company's multi-asset and alternatives segments--two areas management has targeted for higher levels of growth over the next five to 10 years. While we had lifted our projections for both segments in June following BlackRock's investor day presentations, we felt that our forecasts were a bit too conservative (especially considering the more recent rates of organic growth we've seen from both segments). Our new outlook has the company overseeing close to $2 trillion in multi-asset AUM, and nearly $1 trillion in alternatives AUM, by the end of 2030 (up from $1.5 trillion and $600 billion, respectively, in our previous forecast). We expect most of the growth in the multi-asset platform to be organically driven, as the company expands the reach and capabilities of its LifePath target date fund offerings, while the expansion of its alternatives platform is expected to be a mixture of both organic and acquired growth. For BlackRock to be competitive with the major alternative asset managers--Blackstone, Apollo Group, KKR, Ares and Carlyle Group--it will need to not only match the leaders in the industry from a total AUM perspective but have scale within each of the major alternative segments: private equity, real estate, credit alternative, and hedge funds. While the company already has a big presence in some of these segments it will likely need to have more $5-billion-plus "mega funds" in its stable to draw the attention of more institutional and high-net-worth investors. With BlackRock expected to generate around $8 billion in annual free cash flow on average the next five years, we don't expect the funding of any acquisitions or new alternative funds to be a problem.

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