BlackRock: What's Driving Their Growth?Jan 19, 2021
While Blackrock (BLK) shares sold off last week due to some poor short term numbers, we believe BLK will use 2021 to re-invest, the much needed capital, into their overall business. Using this capital to re-invest in their business, we see this paying off nicely in the long run and anticipate an emerging growth story for the mature investment bank.
Looking more closely into the investments Blackrock is planning, we see this fueling growth most largely in technology. Like most players in the industry, this investment is long overdue. In order to keep up with the up and coming players in the industry, BLK's planned investment in technology will be a necessity of fueling sustainable growth. Within technology, we see Blackrock making the largest investments in their Aladdin program. Aladdin is an end-to-end operating system for investment professionals to see their whole portfolio, understand risk exposure, and act with precision. This is slowly becoming the gold standard for institutional investors in the industry.
With the investment in these types of technology, we forecast this investment to sustain BLK's revenue to grow by double digits for years to come!
Looking more closely into their other investments, we see the other largest investment into their iShares product. iShares is the largest provider of exchanged traded funds (ETFs) in the world and is still growing! Within this program we are forecasting the following:
- ESG ETFs to reach over $1T in AUM by 2030 (up from $200B today)
- Bond ETFs to reach over $1T in AUM by 2030 (up from $700B today)
- More customized solutions for people who want exposure from ETFs but with more variation! These three forecasts, should also contribute to the double digit revenue growth year over year (YoY) described above.
While BLK is making investments across the board outside of the above (i.e. China, Private Investing, etc.), we believe their investments in technology and their iShares program should continue to fuel their growth over the next decade! When factoring this additional growth into our models (we are running a DCF - Discounted Cash Flow model), we believe BLK is severely undervalued relative to the current stock price. Also when factoring in any potential macro gains from any sector rotations into inflationary assets like financials, we're looking at a stock that now has two ways to grow too! Additionally, while BLK in itself is a good investment, BLK should be a part of a diversified portfolio in order to hedge against any unforeseen changes in market dynamics!
Price Target: $880
Target Date: 12/2021
Current Stock Price: $730