Goldman Sachs Removes BlackRock From Conviction Buy List

Goldman Sachs has removed BlackRock, Inc. (NYSE: BLK) from the Conviction List, but maintains a Buy rating on the stock as it feels the risk/reward to bemore balanced.

"While we still see BLK as a structural winner in Asset Management, we expect its near-term organic fee rate growth (primary driver behind the stock's premium P/E) to decelerate, limiting further multiple expansion," analyst Alexander Blostein wrote in a note.

That said, the analyst maintains his Buy rating, saying that the company can still achieve leading 3–5 percent organic growth over the long term driven by its product mix, secular growth in ETFs, multi-asset and alternatives.

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However, Blostein noted that a more "challenging mix shift (pressure on active and faster growth in the lower fee, Core iShares) could weigh on the firm's overall fee-rate/organic revenue growth."

Demand for the lower-fee "core" iShares funds is accelerating, accounting for over 100 percent of all iShares equity flows year-to-date, now 19 percent of iShares Equity AUM versus 14 percent two years ago.

"With a 10bp mgmt fee vs. 37bp for the rest of the bucket, we believe this could drive further fee rate compression (holding diverging beta trends constant)," Blostein highlighted.

But, the analyst raised his price target to $400 from $390 due to higher SPX multiple.

At the time of writing, shares of Blackrock were down 0.65 percent to $372.30.

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