Summary
- Blackstone's stock price has dropped significantly as broader U.S. equity markets have declined in recent months.
- The company's earnings are highly correlated to asset prices, making a decline in valuation very much justified.
- However the company's valuation likely has settled in correctly with the upcoming expected earnings drop and likely further movement by domestic asset classes.
- On the positive side, the company's seemingly increasing diversification may make room for a small recovery if it turns out to be so.
As broader equity markets have sank the past two months it appears that Blackstone's (BX) incredible rally back to its long-forgotten $40 a share levels has dissipated as well. As a company whose earnings has been shown historically to be highly linked to U.S. equity markets, a decrease in the company's share price is well-warranted.
However the company likely has deflated enough, based on its historical price-to-earnings level and the level of expected upcoming earnings decline, to not fall much further baring an extraordinary surprise.
In fact, the company's increasing portfolio and international diversification might be a greater cushion than has currently been tested, creating the possibility for a small upturn for the company while wider domestic asset markets find their grounding.
