Blackstone Stock Crashed: Buy When Everyone is Fearful

Blackstone stock price has been in a major downward trend in the past few months as concerns about its business continues. The stock tumbled to a low of $74.60, which was about 50% below its all-time high. This decline has brought its total market cap to about $87 billion. So, what next for the BX share price.

High-interest rates concerns

Blackstone is a major private equity company with over $951 billion in assets under management. The firm operates its business in various segments, including real estate, credit, private equity, hedge funds, and insurance among others. 

The company’s business model is relatively simple to understand. It receives funds, mostly from institutional and high net-worth individuals, and then allocates them in its key strategies. For example, it invests in real estate in the United States and other countries. It is the biggest holder of real estate in the US.

The company also invests in companies and then sells them later at a profit or pushes them public. It owns companies like Emerson Climate Technologies, Hello Sunshine, Ancestry, Bumble, and Legence. 

Therefore, the Blackstone stock price suffered in 2022 as interest rates in the United States and other countries rose. High-interest rates make it difficult for PE companies like Blackston, KKR, and Carlyle Group. For one, it reduces the number of deals in the industry. 

Also, it makes financing of these deals highly expensive. In the past few months, many banks have lost millions of dollars after financing deals like Morrisson’s and Twitter.

Therefore, as interest rates remain at an elevated level, there are concerns that the company will struggle in 2023.

BREIT concerns remain

Blackstone share price dropped in 2022 as investors worried about the company’s BREIT business. BREIT is a business that provides investors with access to real estate solutions. These concerns emerged when the company halted withdrawals of these solutions. As a result, investors are worried about the headline risks associated with the business.

In reality, investors are going too far since the halt of withdrawals is in line with the company’s policy since real estate is a highly illiquid business. In a statement, the firm’s CEO said:

“The idea that there is something going wrong with this product because some people are redeeming, is conflating completely incorrect assumptions, completely incorrect assumptions.”

There are two main reasons why BREIT investors started to redeem their holdings. First, while most REIT stocks were down by more than 30% in 2022, BREIT was actually up by over 5%. Also, Asian stocks underperformed. Therefore, it makes sense for some investors to want out when the macro situation changed.

Second, there was concerns about the illiquid nature of BREIT compared to other REITs. Therefore, people started to shift their funds from BREITs to cheap REITs that are highly liquid.

In the long term, I remain concerned about investing in Blackstone and other private equity companies in an era of high-interest rates and unfriendly regulators. I suspect that the shares will likely continue falling in the coming months as this fear remains. 

Blackstone stock price forecast

blackstone stock price

The daily chart shows that the BX stock price has been in a strong bearish trend in the past few months. It has lost its 50% of its value and moved below the 25-day and 50-day moving averages. A closer look shows that the shares have formed a descending wedge pattern, which is usually a bullish sign. But the wedge is still forming, meaning that it has more downside in the near term. 

I suspct that the Blackstone stock price will crash to about $60 in 2023 and then bounce back sharply to about $110 in the third or fourth quarter of the year.

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