The other day, Jamie Dimon quipped that the private credit market is about to face a downturn that could be “worse than people think.” Today’s Bear of the Day happens to be one of the poster children for the private credit crisis right now. That’s shown up in estimates that are moving in the wrong direction as analysts continue to lower the bar ahead of what’s to come.
I’m talking about Zacks Rank #5 (Strong Sell) Blue Owl Capital (OWL). Blue Owl Capital has been a market favorite in the alternative asset management space, riding the wave of private credit and institutional inflows. But here’s the problem, when everyone’s on the same side of the trade, the bar gets set awfully high. And right now, expectations for OWL look stretched.
The real risk here is private credit. This has been one of the hottest areas in finance, but it hasn’t been tested in a true downturn at scale. If economic conditions tighten or defaults begin to rise, the perception of safety in private lending could shift. That’s not just a theoretical risk, it directly impacts fundraising, deployment, and ultimately fee growth for firms like Blue Owl.
Set to report earnings before the bell tomorrow, Thursday April 30th, Blue Owl has already seen a string of negative earnings revisions coming from analysts. Over the last sixty days, seven analysts have cut their earnings estimates for the current year and next year. The bearish sentiment has cut the Zacks Consensus Estimate for the current year from 97 cent to 90 cents while next year’s number is off from $1.17 to $1.06.
Blue Owl Capital Inc. Price and Consensus
Blue Owl Capital Inc. price-consensus-chart | Blue Owl Capital Inc. Quote
That’s the bad news, the good news is that analysts are still estimating 11.4% revenue growth this year and 14.99% next year. While estimates have been slipping, growth is still baked in.
The Financial – Investment Management industry ranks in the Bottom 15% of our Zacks Industry Rank. There are other stocks within the industry that are in the good graces of our Zacks Rank. These include Zacks Rank #2 (Buy) stocks Cohen & Steers (CNS) and FG Nexus (FGNX).
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
