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Blackstone (NYSE:BX) stock price has come under intense pressure as the private equity sector faces the biggest headwind in years. After peaking at $115.78 in September, the stock has dived by more than 20% to the current $92. Other PE stocks like Carlyle, Apollo, and Brookfield Asset Management have also dived.
Private Equity woes
The private equity industry is going through a rough patch as management confront numerous headwinds in the industry. Interest rates have surged, raising the cost of financing. Valuations of portfolio companies have slipped while Asset Under Management (AUM) growth has slowed.
Most importantly, deal-making in the PE industry has slowed dramatically. PE firms depend on deal-making, which helps them exit their portfolio companies at a profit. The real estate industry is also facing headwinds as financing dry and a wall of maturities near.
Blackstone confirmed these fears after its financials disappointed in the third quarter. The company’s total AUM jumped by 6%, helped by the company’s credit and insurance sector. As a result, its fee-related earnings jumped to $1.1 billion.
Total revenue dropped by 10.4% YoY to $2.3 billion, which was much lower than what analysts were expecting. Real estate earnings came in at over $557 million while private equity jumped to over $456 million. Credit and insurance and hedge fund solutions rose to $304 million and $66 million.
There are concerns about the company’s growth in the coming months since the Fed has hinted that rates will remain at an elevated level for a while. However, there are some positive signs.
For one, the volume of deals has jumped in the past few months. For example, ExxonMobil has acquired Pioneer Natural Resources in a $59 billion deal. Chevron also acquired Hess while Realty Income bought Spirit Realty. This is a sign that deal-making could stage a comeback in 2024.
Watch here: https://www.youtube.com/embed/PcErGYewFHY?feature=oembedOther potential catalysts for Blackstone
There are other potential catalysts for Blackstone stock. First, the company has become one of the biggest players in private credit. Its private credit and insurance assets have jumped to more than $297 billion and over $39 billion in dry powder. Analysts at Blackstone believes that the private credit market will get to over $3.5 billion by 2028.
Further, the alternative asset industry is expected to continue growing as investors look for uncorrelated returns. If this happens, Blackstone will likely benefit since it is the biggest player in the industry.
Third, there are signs that the Federal Reserve will start cutting interest rates in the coming months. If this happens, PE companies will likely bounce back.
Blackstone stock price forecast
BX chart by TradingView
The daily chart shows that the BX share price has been in a strong downward trend in the past few months. Along the way, the stock has moved to the 50% Fibonacci Retracement level.
The shares have also formed a death cross pattern, which happens when the 200-day and 50-day Arnaud Legoux Moving Averages (ALMA) make a bearish crossover. The Relative Strength Index (RSI) has moved slightly above the oversold level.
Therefore, the short-term outlook for the stock is bearish, with the next level to watch being the 61.8% retracement point at $86.85. A break below that level will see it drop to the next support at $79, the 78.6% retracement point. In the long term, however, the shares will likely bounce back.
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