Blue Owl Capital Raises Capital to Outperform Oppenheimer After Selloff (NYSE:OWL)

Oppenheimer upgrades Blue Owl Capital’s rating (NYSE:OWL) was expected to outperform on Friday, as shares of the alternative asset manager fell 9.9% on Thursday despite the company reporting second-quarter results in line with Oppenheimer’s expectations.

Analyst Chris Kotowski noted that the sell-off took place at a time of general market tension and on a day when Apollo Global Management (APO) fell 7.5% on results day. “But that struck us as a spread earnings (“SRE”) issue, and the beauty of OWL’s business model is that there is no SRE,” he wrote in a note to clients.

The biggest concern raised during Blue Owl’s (OWL) earnings call was that it recently announced and closed acquisitions that could dilute its 60% operating margin, “even if it doesn’t dilute earnings per share,” he added. “That just seems silly to us.”

Kotowski analyzes the company’s recently announced acquisition of Atalaya and concludes that “the concerns are cosmetic, and the economic benefits are real.”

In addition, “we believe that credit is likely to be the best growth opportunity for Alts in the coming years, and OWL is well positioned to do so,” he wrote.

Oppenheimer’s model pegs the fair value of Blue Owl Capital (OWL) at $21 per share. “So, with 22% potential upside plus a ~5% dividend yield in our next NTM expectations (next 12 months), we see this as one of those relatively rare attractive entry points to buy this high-quality growth stock,” Kotowski wrote.

The Outperform rating is in line with the average SA Analyst Rating and the average Wall Street Rating of both Buy, and contrasts with the SA Quant Rating of Hold.

Blue Owl (OWL) with edge up 0.1% in Friday’s pre-market quotes.