Deutsche Bank lifts Apollo Global stock target, keeps Buy rating

On Friday, Deutsche Bank (ETR:DBKGn) maintained a Buy rating on Apollo Global Management (NYSE:APO) and increased its price target to $123 from the previous $122. The firm's analyst utilized a sum-of-the-parts valuation method to assess the company's worth, considering various earnings components such as fee-related earnings (FRE), spread-related earnings (SRE), carried interest earnings, and the valuation of Apollo's balance sheet.

Apollo's balance sheet evaluation includes excess capital from Athene that is not allocated to the earnings model. The analyst projects Apollo's FRE to grow by 19.8% annually from 2023 to 2026 and applies a price-to-earnings (P/E) ratio of 19.8 times to the 2025 estimated after-tax FRE per share. For SRE, a normalized compound annual growth rate (CAGR) of 11.6% from 2023 to 2026 is expected, with a P/E ratio of 7.5 times applied to the 2025 estimated after-tax SRE per share.

The carried interest earnings are valued by considering the value of carry funds and dry powder over a five-year horizon at a 2.0 times multiple of invested capital (MOIC). In valuing Apollo's balance sheet, a 1.0 times book value multiple is used.

The analyst also noted potential downside risks to the price target. These risks include the possibility of a slowdown or recession in the US or global economy, a prolonged equity market correction, and a credit event that could negatively impact Athene's investment portfolio. Other risks involve the risk of spread compression that could reduce SRE, the inability to generate strong growth organically that could diminish future FRE and SRE, the inability to conduct accretive insurance block acquisitions, and the risk of key leadership departures.

Following Deutsche Bank's optimistic outlook on Apollo Global Management (NYSE:APO), current metrics from InvestingPro reveal additional insights into the company's financial health and market performance. With a substantial market capitalization of $63.11 billion, Apollo stands out as a prominent player in the Financial Services industry. The company has demonstrated a remarkable revenue growth rate of 194.58% over the last twelve months as of Q1 2023, highlighting its dynamic earning potential. Furthermore, Apollo's commitment to shareholder returns is evident through its consistent dividend payments over the past 14 years, with the latest dividend yield being 1.55%.

InvestingPro Tips indicate that while analysts anticipate a sales decline in the current year, Apollo is expected to remain profitable with a strong return over the last three months and a significant price uptick over the last six months. The stock's high return over the last year at 84.73% and a Price / Book multiple of 4.99 suggest a robust investor confidence in Apollo's market valuation. Investors seeking to delve deeper into Apollo's performance and strategic positioning can find an additional 12 InvestingPro Tips on the company's profile. For those interested in leveraging these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

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