Blackstone Inc. (BX) trades at $125.25, but a discounted cash flow (DCF) valuation pegs its worth at $52.22, hinting at overvaluation. High market expectations, opaque private market deals, and bets on Middle East stability drive this gap. With private equity (PE) stocks at high multiples, is BX riding a bubble, or does the market see unique value in Middle East prospects?
DCF Valuation
A DCF model uses 2024 FCFE of $2,961,596,000, a 12% 5-year CAGR (near the 14% historical revenue CAGR), a 10% CAPM, a 3% perpetual growth rate, and 1,211,662,336 shares:
- Stock Price: $63,282,843,473 / 1,211,662,336 = $52.22
At $52.22, BX appears overvalued against $125.25 and Barclays’ $186 target, suggesting the market expects a CAGR above 12% or a CAPM below 10%—aggressive assumptions.
Overvaluation Risks
BX’s P/E ratio of 54.9 dwarfs the S&P 500’s ~25, fueled by optimism despite Q1 2025’s $385 million realization shortfall (46% below $716 million consensus). Private market opacity obscures portfolio risks, and higher rates (4.57% 10-year Treasury, 2024) may compress deal returns, inflating the stock if expectations falter.
Middle East Gambit
BX targets Middle East stability, raising $7.5 billion in 2024 with Gulf sovereign wealth funds and securing a $1 billion Saudi PIF infrastructure deal in 2022. UAE real estate and tech beckon, but geopolitical risks like Iranian tensions could disrupt plans, with the market possibly overpricing this strategy’s success.
PE Bubble or Middle East Hype?
PE firms like BX and KKR trade at high multiples despite a 15% drop in 2024 global deal value (PitchBook). BX’s valuation assumes robust growth, potentially mirroring a bubble or excessive faith in Middle East stability fueling deal pipelines. The $52.22 DCF valuation, far below $125.25, signals caution—market prices may reflect speculation over fundamentals.
Sensitivity Analysis Grid
This grid uses 2024 FCFE ($2,961,596,000), 1,211,662,336 shares, and a 3% PGR, varying CAPM from 8% to 12% and CAGR from 8% to 16%.
