Blue Owl Capital is still recommended as a buy because institutional demand for alternative assets remains robust, according to a report out Monday from TD Cowen. Still, the asset manager is likely to see choppy near-term performance through Labor Day “reflecting elevated redemption cycle and impact on earnings,” analyst led by Bill Katz wrote. TD Cowen reiterated a buy on Blue Owl but lowered its 12-month price target to $14 from $16, implying roughly 54% upside from Friday’s close. “Investors are effectively pricing in (at a minimum) complete extinction of OWL’s ~$35B (in NAV) evergreen complex … expect short-term price chop,” analyst Bill Katz said Monday in the note. Shares of Blue Owl tumbled nearly 6% on February 20, after selling $1.4 billion of loan assets in three private debt funds and permanently restricting withdrawals from one retail-focused funds. Blue Owl Capital Corporation II, which paused quarterly redemptions, accounted for the largest portion of the sale. Blue Owl’s actions have helped stoke investor jitters over risks in the nearly $2 trillion private credit market. As a result, new investors may be hesitant to allocate capital to Blue Owl-operated funds, while existing investors are likely to continue to pull out of some of its vehicles, TD Cowen said. “Tactically, we expect OCIC/OTIC redemptions to remain elevated, while headline noise in Private Credit could delay 401(k) entry,” Katz wrote, referring to Blue Owl Credit Income Corp. (OCIC) and Blue Owl Technology Income Corp (OTIC). Blue Owl co-CEO Doug Ostrover offered last week some promising updates about the asset manager’s outlook across real assets, including data centers, the TD Cowen analysts said. The executive also argued that institutional demand for high-growth alternative assets has remained strong. TD Cowen argues that the 9.9% dividend yield will help support the stock and that a 20 times multiple on the remaining pieces of the company still leaves about a $15 value in the stock. Blue Owl’s funds show “ample liquidity, even under extreme scenarios, suggesting OWL will not be a ‘forced seller’ of assets,” Katz said. TD Cowen matches the view on the Street. Three-quarters of the 16 analysts covering Blue Owl have a buy or strong buy rating on the stock, according to LSEG data. Blue Owl has slumped nearly 13% over the past month, beginning roughly around the time that it restricted withdrawals from one of its funds. OWL 1M mountain Blue Owl shares have fallen nearly 13% since around the time the firm restricted withdrawals from one of its retail-focused debt funds.
