On Monday, DigitalBridge Group Inc. (NYSE: DBRG) experienced a revision in its stock outlook as Keefe, Bruyette & Woods adjusted the price target to $17.75, a decrease from the previous $18.50. Despite this change, the firm maintained an Outperform rating for the company's stock.
The adjustment followed a review of the financial model for DigitalBridge. The firm's second quarter estimates were revised downwards to $0.05 from $0.11, attributing the change to the timing of investor catch-up fees. Additionally, the firm's estimates beyond the second quarter were reduced by 3% due to expectations of lower other income.
Keefe, Bruyette & Woods forecast continued growth for DigitalBridge, projecting net growth in fee-earning assets under management (FEEUM) of $4-4.5 billion, or an annual increase of 10-13%. They also anticipate a fee-related earnings (FRE) margin of 35-40% and an FRE growth of 15-20%.
The firm's analysis suggests that while the shares are deemed fairly valued based on in-place earnings, significant upside potential is expected with the growth of FEEUM and earnings. Keefe, Bruyette & Woods acknowledged the slower-than-anticipated growth and the first quarter earnings, but expressed a positive outlook on DigitalBridge's digital infrastructure strategy. They anticipate that the company's dynamics will improve notably in the second half of 2024 and into 2025.
In other recent news, DigitalBridge Group Inc. reported a robust growth in its first quarter earnings, highlighting a 17% increase in fee-earning equity under management (FEEUM) to $32.5 billion and a 21% surge in fee revenues to $72.8 million. This growth was largely driven by the company's strategic focus on power solutions for data centers, with over 2 gigawatts under construction and a pipeline exceeding 5 gigawatts. Truist Securities and RBC Capital, however, have revised their price targets for DigitalBridge, reducing it to $19 from previous targets, while maintaining a positive outlook on the company's shares.
InvestingPro Insights
As DigitalBridge Group Inc. (NYSE: DBRG) navigates through its financial revisions, insights from InvestingPro show a mixed picture of valuation and performance. The company is currently trading at a low EBIT valuation multiple, which could signal an attractive entry point for investors looking for undervalued opportunities. Additionally, DigitalBridge is also trading at low EBITDA and earnings multiples, reinforcing the perception of the stock being potentially undervalued.
However, investors should be aware of the challenges ahead. Analysts anticipate a sales decline in the current year, and net income is also expected to drop. These forecasts are important to consider when evaluating the company's near-term financial health. Moreover, with the stock trading near its 52-week low and experiencing significant price falls over the last three months, investor sentiment appears cautious.
On the positive side, DigitalBridge's cash flows are deemed sufficient to cover interest payments, which is a reassuring sign of financial stability. For those interested in the company's long-term prospects, the current market valuation may present a unique opportunity, especially when considering the substantial growth in revenue over the last twelve months as of Q1 2024, which stands at an impressive 82.22%.
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