Blue Owl Stock Is Unjustly Cheap, Says Raymond James

Marc Lipschultz, co-chief executive officer of Blue Owl Capital. (Michael Nagle/Bloomberg)

Key Points

• Blue Owl Capital’s shares trade at 17-times next 12 months’ earnings, lower than peers’ 20 to 30 times, despite concerns.
• Raymond James upgraded Blue Owl Capital to Strong Buy with a $20 price target, citing manageable redemption risk and strong fund-raising.
• Blue Owl Capital’s fee-related earnings are growing at a 20% rate, with cash earnings forecast at $1.04 in 2026 and $1.23 in 2027.

Shares of the private credit manager Blue Owl Capital have been sapped by worries about nonbank lending, as well as a failed merger between two of its funds.

Those jitters might nudge up redemptions in its nontraded vehicles.

The fears for Blue Owl are overwrought, however, says Raymond James analyst Wilma Burdis. The $16.67 stock trades at just 17-times its next 12 months’ earnings—compared with 20 times to 30 times for its alternative asset manager peers. In a Wednesday note, she lifted her recommendation to a Strong Buy, saying the stock should trade at $20.

“We think redemption risk is manageable as OWL appears likely to honor all requests, which would remove an overhang on the stock,” Burdis writes. “Fund-raising has remained strong amid volatility…Credit metrics appear solid.”

This year’s selloff in publicly traded lending funds—like the company’s big Blue Owl Capital Corp. —fattened their yields and made the yields of non-trading funds look paltry. That foiled a November plan to have the big public fund absorb a smaller private fund whose yield was also lidded by old rules limiting the leverage it could use. A Nov. 16 Financial Times article showed how the public fund’s discount might hurt private fund investors, and Blue Owl shelved its plans.

Other potholes in Blue Owl’s roadway are increased redemptions at its nontraded funds. Burdis says it is possible that redemption requests at some might exceed the threshold of 5% of assets, after which Blue Owl is allowed to only honor them partially, in a pro rata fashion. She thinks the fund manager will be able to easily accommodate redemptions, since the funds hold a large portion of cash and liquid investments.

Despite the worries of some investors, Raymond James believes the credit fund manager’s lending business is in fine shape. It earns steady fees and high profit margins. Burdis isn’t changing her forecast for cash earnings of $1.04 a share in 2026 and $1.23 in 2027. Its earnings from fees have been growing at a 20% rate.

It’s a buying opportunity, she says.

Write to Bill Alpert at william.alpert@barrons.com