Market Overview

Morgan Stanley Turns Bullish On Apollo Global Management: Here's Why

Share:
Morgan Stanley Turns Bullish On Apollo Global Management: Here's Why
Related APO
Q4 Earnings Outlook For Apollo Global Management
Analysts Diverge On Arconic After It Shelves Sale Plans
Apollo Global Management goes ex-dividend tomorrow (Seeking Alpha)

After gaining nearly 75 percent over the past year, Apollo Global Management LLC (NYSE: APO)'s stock still has plenty of runway ahead in 2018, according to Wall Street's latest bullish analyst.

The Analyst

Morgan Stanley's Michael Cyprys upgraded Apollo Global's stock rating from Equal-weight to Overweight with a price target boosted from $32 to $42.

The Thesis

Shares of Apollo Global re-rated higher throughout 2017, but in 2018 the bullish case will continue due to the company's growth prospects, a credit business scaling faster than expected, new initiatives in the pipeline and the company entering a "portfolio harvesting stage," Cyprys said in the Wednesday note. (See the analyst's track record here.) 

Alternative asset managers like Apollo Global are operating in a "Goldilocks environment" that will be supportive of earnings growth, Cyprys said. 

Apollo is expected to double its credit business over the coming three years from its current $157 billion assets under management to roughly $300 billion by 2020, according to Morgan Stanley. Earnings from the credit segment can double from $471 million in 2017 to $954 million in 2020, the analyst said. Some of the initiatives Apollo is focusing on include infrastructure and real estate-themed products and vehicles, Cyprys said. 

Morgan Stanley's new $42 price target is based on a sum-of-the-parts valuation and implies an 11.5x multiple on 2019 estimated EPS, which is a 25-percent premium to the historical valuation of 9.2x. The company deserves a premium valuation given its accelerating growth and new initiatives, Cyprys said. 

Price Action

Shares of Apollo Global gained more than 1 percent early Wednesday morning.

Related Links:

25 Stocks Moving In Wednesday's Pre-Market Session

A Peek Into The Markets: U.S. Stock Futures Rise Ahead Of Fed Minutes

Latest Ratings for APO

DateFirmActionFromTo
Nov 2018Morgan StanleyDowngradesOverweightEqual-Weight
Nov 2018CitigroupMaintainsBuyBuy
Oct 2018CitigroupMaintainsBuyBuy

View More Analyst Ratings for APO
View the Latest Analyst Ratings

Posted-In: Alternative Asset Managers alts Asset ManagersAnalyst Color Upgrades Price Target Analyst Ratings Real Estate Best of Benzinga

 

Related Articles (APO)

View Comments and Join the Discussion!

High-Performing Italy ETF Looks For An Encore In 2018

Benzinga's Top Upgrades, Downgrades For January 3, 2018