Brookfield Asset Management Is Fully Priced, Industry Fundamentals Shaky: Analyst Downgrades Stock

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  • Keefe, Bruyetter & Woods analyst Michael Brown downgraded Brookfield Asset Management Ltd BAM to Underperform from Market Perform and reduced the price target to $34 from $36.
  • Given the industry-wide fundraising challenges, the analyst is cautious on near-term growth in fee-bearing-capital (FBC) and management fees and expects these to be below consensus. 
  • The analyst sees the most significant risk for Real Estate (25% of FBC) and Private Equity (10% of FBC) and believes that BAM's Infrastructure, Renewables, and Credit businesses are better shielded from the industry pressures. 
  • Brown expects inflows of $17 billion into FBC (below consensus of $22 billion) in Q1 2023 and projects management fees to be 1.8% below the consensus in 2023 and 2.8% below the consensus in 2024, leading to the below-consensus expectation for Distributable Earnings (DE).
  • Consequently, the analyst lowered the expectation for DE to $1.34 from $1.50 for 2023 and $1.57 from $1.68 for 2024. 
  • Price Action: BAM shares are trading lower by 1.00% at $32.82 on last check Tuesday.
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