Analyst Downgrades P10 Stock Amid Fundraising Challenges
Morgan Stanley Adjusts Stance on P10 Inc.
On Monday, Morgan Stanley revised its outlook on P10 Inc (NYSE:), downgrading the stock from Overweight to Equalweight and lowering the price target to $9 from $12. The shift reflects concerns about the company’s growth and earnings potential in a tough fundraising environment.
Growth and Earnings Challenges
P10 Inc, known for its focus on the lower middle market in the private sector, is expected to achieve an average organic growth rate of 11% over the next three years. However, the projected earnings per share (EPS) compound annual growth rate (CAGR) stands at just 9%. The company’s management plans to increase investments, potentially impacting profit margins negatively due to fundraising hurdles.
Earnings Stability Amid Market Volatility
P10’s fully realized fee-related earnings (FRE) model is seen as a stabilizing factor for its earnings amidst market fluctuations. Nevertheless, the absence of cyclical earnings streams could restrict P10’s potential upside as the capital markets recover.
Valuation and Peer Comparison
Compared to peers like Hamilton Lane (NASDAQ:) Incorporated and StepStone Group Inc., P10 is trading at a discount due to slower earnings growth and a margin reset that fell short of expectations. This could delay the alignment of P10’s valuations with those of its peers. The revised price target of $9 reflects these concerns and a more cautious outlook on the company’s financial performance.
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