Blue Owl Capital shares have collapsed more than 65% from last year’s highs, pushing the stock close to all-time lows.
The selloff has been driven by fears around private credit and the SaaSpocalypse, but recent analyst upgrades suggest those concerns may be overdone.
With a 10% dividend yield and expectations at rock bottom, the risk/reward profile looks increasingly attractive.
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Blue Owl Capital Inc. (NYSE: OWL), an alternative investment asset management group, has been making headlines for all the wrong reasons lately.
Shares are currently trading around $9, down more than 65% from their highs last year and over 40% since the start of this year alone. It’s not exactly a high-growth tech stock, though its recent price action would suggest otherwise.
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For a company in the private credit space, where it specialises in loans to the software industry, that kind of collapse raises some worrying questions, and, as we’ll see below, investor fears have been justified. They’re right to ask whether something is fundamentally broken, but at the same time, a growing group of voices is calling it a screaming buy opportunity.
Let’s take a closer look at what’s going on and how real this opportunity might be.
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To set the scene, the multi-month selloff in Blue Owl shares has largely been driven by a combination of weakening sentiment in the private credit space and the selloff in traditional software stocks, which make up the bulk of Blue Owl’s creditors. As we’ve been highlighting recently, software stocks have been under immense pressure to prove they can avoid being completely disrupted by the AI revolution.
Many of them have had to watch as stock price growth trajectories flatlined, causing shares to collapse to multi-year lows. As a major lender to these types of companies, Blue Owl is particularly exposed to any of its creditors getting into financial difficulties.
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With investors’ appetite for risk souring even more with the conflict in the Middle East, they’ve become particularly wary of any cracks in the credit markets. If defaults were to rise or liquidity were to tighten, firms like Blue Owl would face pressure on both asset values and fundraising. Add in growing concerns that the company might be looking to restrict investors from withdrawing their money, and you can see why the stock has been dumped en masse.
