Although Blue Owl Capital Inc. (NYSE: OWL) underperformed, the company is benefiting from a high-growth, high-margin, low-cap business, according to BofA Securities.
The Blue Owl Capital analyst: Craig Siegenthaler initiated coverage of Blue Owl Capital with a buy rating and price target of $18.
The Blue Owl Capital Thesis: The company offers a 3% dividend yield and its incremental operating margins are over 60%, Siegenthaler said in the initiation note.
He added that there is high visibility on Blue Owl Capital’s “strong earnings growth in 2022-23 due to:
- Increase in Dyal VI
- Several increases planned for BDC (business development company)
- $9 billion in hidden assets under management, which translates into $140 million in management fees
- Management says the company’s additional management fee will increase to $65 million if BDC technology goes public
- Additional cash inflows from Oak Street acquisition
“OWL management fees are isolated from redemptions and we see limited downside risk to EPS in macro scenarios,” the analyst wrote.
“We also believe the stock’s recent pullback was unwarranted based on our growth/earnings outlook, but it has created a particularly attractive buying opportunity for investors,” Siegenthaler added.
OWL Price Action: The shares are down 2.58% at $11.89 per share on Monday morning at the release.
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