Deutsche Bank Downgrades Blackstone After Moving Valuation Model To Sum Of The Parts

Deutsche Bank’s Brian Bedell downgraded the rating on Blackstone Group LP BX from Buy to Hold, while lowering the price target from $30 to $28.

Bedell continues to view the company as the “premier alternative manager company” across Deutsche Bank’s coverage universe.

Positives

The analyst explained that this was due to various reasons, such as Blackstone Group’s “very strong and careful long-term management execution,” ability to avoid “outsized position losses” and “generally very strong investment performance track records.”

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Bedell also views the company’s business line diversity as a positive, especially due to Blackstone Group’s positions in real estate, private equity, credit products and hedge-fund based alternative products.

Sum-Of-Parts Valuation

“We are using the sum-of-parts valuation approach, which we view as more appropriate for a volatile backdrop in which levels of DE on a 1-2 year basis are highly uncertain,” Bedell explained.

The current downgrade in rating is based on this change in methodology, as well as the expectations for Alt stocks to lag the market and Deutsche Bank’s coverage over 2017, especially if the markets continue to be volatile.