Alternative-asset manager
DigitalBridge
suffered an 8% stock drop Tuesday, after investors panned a quarterly report meant to show off its growing fund-management business. The company’s sell-side fans remain steadfast in their Buy ratings.
December-quarter fund-raising for DigitalBridge’s private-equity funds was weaker than expected, wrote Raymond James analyst Ric Prentiss in a note late Tuesday. So was its guidance for 2024 fund-raising, which Prentiss now expects will be lumpy.
The analyst trimmed his target price for DigitalBridge stock to $23 from $24, yet reiterated his Strong Buy rating. The other seven analysts surveyed by FactSet also maintained their Buy ratings.
The selloff eased Wednesday morning for the Boca Raton, Fla.-based firm, as its stock stayed roughly flat at $18.50.
The quarter was the first in which DigitalBridge showed results after restructuring to get the operations of two data centers off its financial statements. The change was aimed at highlighting its managed funds, and the high-margin fees earned on them. While DigitalBridge ended December with $32.8 billion in fee-earning assets, it had told investors to expect $33 billion to $36 billion. Hence, Tuesday’s stock drop.
The company now expects $36 billion to $38 billion in fee-earning assets by the end of 2024, which is below Prentiss’ prior forecast for $39 billion. Still, he was heartened by DigitalBridge’s guidance for 2024 fee revenue of $335 million to $360 million, with $150 million to $165 million in earnings from those fees. By 2025, Prentiss projects those earnings could reach $195 million, and be worth $3.1 billion in stock-market capitalization, at a 16 times multiple.
The analyst also pointed out that 2024 results could benefit from the sale of several companies in the DigitalBridge portfolio. The value of the alt-manager’s incentive payments from such sales, and of its ownership interests in some companies, could be worth another $2.5 billion to DigitalBridge’s market cap, Prentiss figures.
He projects that DigitalBridge will generate about $90 million in distributable cash in 2024, or 48 cents a share, and then $100 million in 2025, or 55 cents a share. The company is focused on using those cash flows to pay down debt, repurchase preferred stock, pay dividends, or acquire other asset managers, said the analyst.
Expectations for DigitalBridge have been reset, Prentiss concludes. He hopes it will now earn a wider following among financial stock fans.
Write to Bill Alpert at william.alpert@barrons.com
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