BlackRock Stock Rises on Earnings Beat. A Rallying Market Boosted Assets.

Wall Street analysts expected earnings of $8.52 a share on revenue of $4.47 billion, according to FactSet. 

“
BlackRock
generated an industry-leading $190 billion of total net inflows in the first half of 2023, including $80 billion in the second quarter. Our strong investment performance and deep partnerships with clients have led to sustained organic growth,” CEO Larry Fink said in the company statement.

Analysts had expected net asset inflows of $109 billion for the second quarter.

In premarket trading, the stock was up 0.6% , to $744. It had climbed more than 8% over the past five sessions.

The company had assets under management of $9.43 trillion as of the end of June, ahead of analysts’ expectations of $9.37 trillion. It said assets had grown by $831 billion since the end of 2022, driven by consistent organic growth and positive market and foreign-exchange movements.

“Wealth and institutional clients across regions continue to
turn to BlackRock for solutions across their whole portfolio – driving
second quarter net inflows across ETFs [exchange-traded funds] with $48 billion, cash with $23 billion and active with $4 billion,” CEO Larry Fink said.

Bond funds have driven a large portion of BlackRock’s inflows. As the Federal Reserve boosted its target interest rate by five percentage points in just over a year, fixed-income returns are now at their highest in years. Capital flows to the bond market will likely continue accelerating, and BlackRock is well positioned to benefit.

“BLK is an attractive way to play the impending surge of fixed income inflows, both on active and passive side—with particular strength to garner greater share as secular growth of passives continues,” wrote Keefe, Bruyette & Woods analyst Michael Brown in a Tuesday note. 

Brown upgraded BlackRock shares to Outperform from Market Perform, noting that the asset manager’s diverse product lines means it’s more balanced and resilient than many peers. He also sees opportunities for growth through private assets and international expansion. 

Brown lifted his price target for the stock to $835 from $763. At least three other analysts have also raised their target this week. The consensus now suggests that analysts expect BlackRock shares to reach $794 in the next 12 months, up 7.3% from the current level of $740 per share. 

Model portfolio is another booming corner of the industry, where asset managers like BlackRock, Vanguard and
Charles Schwab
bundle a variety of funds into ready-made packages and then sell to financial advisors.  

Last year, more than half the U.S. asset flows to BlackRock’s iShares products—mostly diversified index-tracking ETFs—came from model portfolios, Salim Ramji, the firm’s global head of iShares and index investments, recently told Bloomberg.

That’s up from about one-third of the flows just two years earlier. Ramji said he expects model portfolios across the industry to grow to a $10-trillion business over the next five years from the current size of $4.2 trillion.

BlackRock also generated a lot of buzz lately as it filed an application with the Securities and Exchange Commission to launch a spot-Bitcoin ETF that would track the price of the cryptocurrency. 

While previous applications from other asset managers have been denied or are pending, crypto experts believe that BlackRock has a better chance to receive the approval from the SEC for the first Bitcoin ETF in the U.S.—partially due to a mechanism that allows authorities to track suspicious trades through an surveillance-sharing agreement.

At the moment, it’s difficult for investors to integrate cryptocurrency holdings into their portfolios, as it often requires a separate account. A Bitcoin ETF would give investors a familiar and regulated way to own the token. Bloomberg ETF analyst Eric Balchunas estimates that $30 trillion worth of capital could be unlocked if a spot-Bitcoin ETF becomes available.

Still, despite the many tailwinds, investors are watching whether BlackRock could become a victim of the rising “anti-woke” movement, where Republican lawmakers ask state entities to cut ties with any firms that consider environmental, social, and governance, or so-called ESG, factors in their business and investment decisions. 

Fink has been outspoken about his support for tackling ESG risks in investment strategies. This has made the asset manager a major target for the conservatives.

Lately, Fink has been shying away from using the term ESG and said that he’s ashamed that the word has been weaponized in political debates.

Write to Evie Liu at [email protected] and Adam Clark at [email protected].