BlackRock (NYSE:BLK) is the world’s largest asset management company, and a big player on Wall Street. This status has brought with it a lot of revenue, a lot of earnings, and a lot of good and bad attention. Even so, BlackRock stock hasn’t exactly “crushed it” in terms of performance.
Over the past five years, BlackRock shares have underperformed relative to the broad market, as measured by the S&P 500 index. During this time frame, the S&P 500 has gained by 85.63%, versus gains of 67.76% for BLK.
Thus far in 2024, this lackluster price performance has continued, with BLK down by around 3% this year, versus a nearly 14.5% gain for the S&P 500 year-to-date (YTD).
Nevertheless, when it comes to the next five years, things could play out a lot differently.
BlackRock Stock: Building Upon an Already-Solid Foundation
BlackRock is best known for its ownership of iShares, a family of exchange-traded funds, and for its management of other ETFs and other investment vehicles that seek to capture public market returns for individuals and institutional investors like pension funds.
But while this business provides a solid foundation, in terms of consistent revenue and cash flow, to move the needle for BlackRock stock, the company needs to build upon this foundation, in order to drive further success and growth.
Fortunately, BlackRock is doing just that. First, by expanding its presence in alternative asset classes such as crypto and infrastructure.
At the start of 2024, BlackRock announced plans to acquire Global Infrastructure Partners, an investment firm focused on what is a faster-growing segment of the asset management space. As InvestorPlace’s Will Ashworth pointed out last month, once this deal closes, it will triple the size of BlackRock’s infrastructure asset management business.
Besides the expansion of its alternative asset management business, BlackRock is also pursuing opportunities in other areas of the financial services space.
Just recently, the company announced plans to acquire Preqin, a provider of private markets data. BlackRock is also one of the backers of the planned Texas Stock Exchange.
A Fast Path to $1000 per Share?
Based on the positives and catalysts, it’s easy to see why sell-side analysts expect steady earnings growth for BlackRock in the years ahead. Per the latest estimates, the company is expected to report earnings growth of 12.4% this year, 10.2% next year, and 17.6% in 2026.
Double-digit annualized earnings appears here to stay. This points to BlackRock sustaining its current earnings multiple of around 19.
This valuation represents a premium to competitor State Street (NYSE:STT), but is in line with alternative asset manager MacQuarie Group’s (OTCMKTS:MCQEF) valuation.
By merely sustaining its current multiple, shares could rise in tandem with earnings growth. Based on a back-of-the-envelope calculation, BLK stands a very strong chance of hitting $1000 per share by 2026.
Better yet, it may happen even sooner. How? Instead of meeting analyst consensus, 2025 earnings could end up hitting $50 per share, the high end of forecasts.
In other words, a more than 26.5% rally from current price levels is well within the realm of possibility for BlackRock shares over the next eighteen months. BlackRock’s 2.59% dividend could provide a further boost to total returns.
Bottom Line on BLK
The past may serve as a prelude, but with BlackRock, it’s not necessarily indicative of future returns. BlackRock’s diversification strategy, coupled with organic growth of its core business, could pave the way for elevated earnings growth. This may result in much stronger annualized gains over the next few years.
That’s not all. Alongside with BLK’s dividend providing a total return boost in the short-run, keep in mind too BlackRock’s 14 year track record of dividend growth. According to Seeking Alpha, over the past five years, dividend growth has averaged 9.45% annually.
The jury’s still out on whether major indexes like the S&P 500, which are heavily weighted toward mega cap tech stocks, will continue to deliver above-average returns. If you’re looking to purchase individual securities that you believe have the potential to deliver market-beating returns, consider BlackRock stock worthy of consideration.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.