HomeMost PopularTrailing S&P500 BY 11% YTD, Where Is BlackRock Headed?

Trailing S&P500 BY 11% YTD, Where Is BlackRock Headed?

Actionable Trade Ideas

always free

BlackRock’s stock (NYSE: BLK) has given negligible returns YTD as compared to the 11% rise in the S&P500 index over the same period. Further, at its current price of $816 per share, the stock is trading 11% below its fair value of $914 – Trefis’ estimate for BlackRock’s valuation

Amid the current financial backdrop, BLK stock has witnessed gains of 15% from levels of $720 in early January 2021 to around $815 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the increase in BLK stock has been far from consistent. Returns for the stock were 27% in 2021, -23% in 2022, and 15% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BLK underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BLK face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The company outperformed the consensus estimates in the first quarter of 2024. It posted total revenues of $4.73 billion – up 11% y-o-y, mainly due to an 8% growth in the base fees (total investment advisory, administration fees & securities lending revenue). Further, investment advisory performance fees almost quadrupled to $204 million followed by growth in both the technology services revenue and distribution fees. In addition, the average assets under management (AuM) increased 14% y-o-y to $10.18 trillion in the quarter. On the cost front, the operating expenses as a % of revenues witnessed a favorable drop, leading to an operating margin of 35.8% vs, 33.9% in Q1 2023. Overall, the net income improved 36% y-o-y to $1.57 billion.

The top line marginally decreased to $17.86 billion in FY 2023. It was mainly due to a drop in distribution and base fees, more than offsetting the growth in technology services revenue. Further, operating expenses as a % of revenues increased in the year. That said, the negative impact was more than offset by higher non-operating income. Altogether, it led to an adjusted net income of $5.5 billion – up 6% y-o-y.

Moving forward, we expect the same trend to continue in Q2 2024. Overall, BlackRock revenues are forecast to touch $20.3 billion in FY2024. Additionally, BLK’s adjusted net income is likely to be around $5.9 billion, resulting in an annual GAAP EPS of $40.05. This coupled with a P/E multiple of just below 23x will lead to a valuation of $914.

 Returns May 2024
MTD [1]
YTD [1]
Total [2]
 BLK Return 8% 0% 114%
 S&P 500 Return 5% 11% 137%
 Trefis Reinforced Value Portfolio 6% 6% 653%

[1] Returns as of 5/16/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.