We came across a bullish thesis on BlackRock, Inc. (BLK) on Substack by Kroker Equity Research. In this article, we will summarize the bulls’ thesis on BLK. BlackRock, Inc. (BLK)’s share was trading at $992.04 as of Feb 7th. BLK’s trailing and forward P/E were 23.61 and 20.96 respectively according to Yahoo Finance.
An executive from BlackRock, Inc. in a suit overseeing financial market monitors in an office environment.
BlackRock, Inc. stands as one of the most influential entities in the global investment management industry, managing $11.6 trillion in assets as of December 2024. The company’s success is underpinned by strong performance across its diversified business model, which spans multiple asset classes, including equities, fixed income, alternatives, and multi-asset strategies. In 2024, BlackRock reported record net inflows of $641 billion, driven by favorable market conditions, organic growth in base fees, and the strategic acquisition of key assets like Global Infrastructure Partners (GIP), HPS Investment Partners, and Preqin. These acquisitions helped the firm expand its presence in private markets and data analytics, significantly contributing to a 14% increase in full-year revenue. Operating income grew by 21%, and diluted earnings per share (EPS) rose by 15% to $42.01. Additionally, BlackRock returned $4.7 billion to shareholders through dividends and share repurchases, further solidifying its commitment to shareholder value.
As a fee-based business, BlackRock generates revenue primarily from management and advisory services tied to the assets it manages. With 55% of assets under management (AUM) in equities, the company benefits from higher management fees compared to fixed income products, which account for 25% of AUM. BlackRock’s dominant position in exchange-traded funds (ETFs) through its iShares platform, which makes up 37% of total AUM, also contributes significantly to its revenue. Despite lower fees from passive ETFs, the massive scale of iShares allows BlackRock to maintain a competitive edge in offering flexible, cost-effective investment solutions to both institutional and retail clients.
Another key contributor to BlackRock’s financial strength is its Aladdin® platform, a technological tool used globally by asset managers, banks, and other financial institutions for portfolio management, data analytics, and risk assessment. Aladdin generates high-margin, recurring income from technology services and subscriptions, further diversifying BlackRock’s revenue streams. Additionally, the firm’s expansion into private markets has opened up new revenue sources from private credit, real estate, and performance-based fees, including carried interest on private equity and infrastructure investments.
Despite its dominance, BlackRock faces several risks that could affect its future performance. Market risk remains a significant challenge, as the company’s revenue is directly tied to the performance of global financial markets. A downturn in markets would lead to a decrease in AUM and management fees. The firm also faces fee pressure, particularly in the highly competitive ETF and index fund space, where low-cost providers are putting downward pressure on margins. Furthermore, BlackRock must navigate fluctuating interest rates, which can affect the performance of fixed income portfolios and client demand. Regulatory risks are also prominent, given the firm’s global operations and the complex legal landscape it must navigate. Heightened regulatory scrutiny could lead to increased compliance costs or restrictions on product offerings.
Nevertheless, BlackRock’s financial resilience and scale position it well for continued growth. With a projected compound annual growth rate (CAGR) of 8.7%, the firm is on track to reach approximately $30 billion in revenue by FY 2029. While its stock may be slightly overvalued, with a fair value of $864 per share based on discounted cash flow (DCF) models compared to its current price of $992, BlackRock remains a compelling investment opportunity. The company’s robust dividend yield of 2.2%, consistent share repurchases, and strategic growth initiatives highlight its commitment to generating long-term value for shareholders. Despite some market risks, BlackRock’s diversified revenue streams, technological leadership, and strong market position suggest it will continue to thrive in the asset management sector for years to come.
BlackRock, Inc. (BLK) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held BLK at the end of the third quarter which was 47 in the previous quarter. While we acknowledge the risk and potential of BLK as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BLK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.