Have you ever watched a stock you really like get absolutely crushed for reasons that, deep down, just didn’t feel completely justified?
That’s exactly what’s been happening with Blue Owl Capital this year. Down roughly 28% year-to-date while the broader market kept grinding higher. Private credit scare stories, redemption headlines, a failed fund merger—plenty of noise. Yet something interesting happened yesterday morning: a major Wall Street firm looked past all that drama and basically said, “Yeah… we’re buying this dip hard.”
A Rare Double Upgrade Most Investors Missed
When an analyst goes from neutral (market perform) straight to strong buy in one move, people tend to sit up and listen. That’s precisely what happened when Raymond James released their latest note on Blue Owl Capital (ticker: OWL).
They didn’t just upgrade—they slapped a $20 price target on it. At recent prices that’s about 20% upside from here. More importantly, they argued that pretty much every negative narrative currently priced into the stock is either temporary or flat-out overstated.
Honestly? I’ve been waiting for someone respectable to say this out loud for months.
First, Let’s Talk Valuation – Because It’s Ridiculous Right Now
Blue Owl currently trades around 17 times forward earnings. That might not sound crazy cheap at first glance, but context matters.
Over the past three years the stock has averaged closer to 19x. And many of its direct peers—firms with heavy fee-related earnings (FRE) business models—still trade between 20x and 30x. So we’re looking at a material valuation discount for a company that continues to grow distributable earnings at a double-digit clip.
“OWL trades at a forward P/E multiple of ~17x versus its 3-year average of ~19x and 20-30x for peers with fee-related earnings (FRE) business models. We think today’s low valuation is driven by a few factors which we expect to abate in the near term.”
That quote pretty much sums it up. The market has thrown the baby out with the bathwater.
Redemption Risk: Real or Just Noise?
One of the biggest overhangs on the stock has been fear of massive redemptions out of their evergreen/non-traded products. You’ve probably seen the headlines—“Investors fleeing private credit!”—and OWL took the brunt of it.
Here’s the part most articles leave out: Blue Owl’s funds actually have plenty of liquidity to handle multiple quarters of elevated redemption requests without forced sales or gating investors.
Even better, management has signaled they intend to honor redemption requests in full. That single decision could remove the biggest psychological overhang on the shares almost overnight. Once investors realize they can actually get their money out when they want it, the panic tends to evaporate.
- Funds maintain several quarters of dry powder and liquidity reserves
- No evidence of forced asset sales at discounts
- Management fees expected to remain largely intact even under stressed scenarios
- Historical redemption cycles in evergreen products have been manageable industry-wide
In my experience, when liquidity fears prove unfounded, the relief rally can be swift and violent to the upside.
Fundraising Momentum Actually Accelerated
While everyone was focused on potential outflows, something quieter—but far more important—was happening on the inflow side.
Between October 1 and December 1 alone, Blue Owl closed an estimated $4.3 billion across its evergreen/non-traded platforms. That’s up from $3.4 billion the previous quarter. In other words, capital raising didn’t just hold steady through the volatility—it actually picked up.
That tells you everything you need to know about real investor demand underneath the headline noise.
The Failed Fund Merger That Wasn’t Actually a Big Deal
Another recent headline scare was the termination of a proposed merger between two of Blue Owl’s private credit funds. Sounds bad on paper, right?
Except when you dig in, the underlying credit metrics across their portfolio remain notably stronger than industry averages. Default rates low, recovery rates high, portfolio companies still growing EBITDA in most cases.
The merger falling apart appears more like a procedural or timing issue than any reflection on credit quality. Yet the stock treated it like the sky was falling.
“Negative headlines on private credit and a recently failed merger of its two private credit funds appear overstated… Owl Capital’s credit metrics seemingly remain solid.”
Why Alternative Asset Managers Deserve Premium Multiples
Let’s zoom out for a second.
The entire alternative asset management industry—private equity, private credit, real estate, infrastructure—has been migrating toward permanent capital and evergreen structures for years. Why? Because recurring fee-related earnings are sticky, predictable, and compound beautifully over time.
Blue Owl sits square in the middle of that secular trend. Roughly 70-80% of their earnings now come from high-margin, recurring management fees rather than volatile carried interest. That’s the kind of business model that traditionally commands premium valuations—not discounts.
What Could Catalyze the Stock From Here
- Proof of redemption normalization – One clean quarter of manageable outflows and the fear trade unwinds
- Continued fundraising success – Another $4B+ quarter would hammer home the growth story
- Dividend increase in 2026 – Management has plenty of room to grow the payout as FRE compounds
- Multiple expansion – Even a modest re-rating from 17x to 20x on growing earnings = 30%+ total return potential
Any one of those would be enough to wake the stock up. All four together? That’s how you get the kind of move that makes investors look brilliant for buying the fear.
Risks? Of course There Are Always Risks
I never like to paint too rosy a picture. A severe recession could pressure portfolio company fundamentals and eventually spill into higher defaults. Interest rates staying “higher for longer” could slow deal activity across private markets.
But here’s the thing—Blue Owl’s direct lending book is mostly senior secured, floating-rate, and covenant-heavy. In many ways it’s designed for exactly this type of environment. Higher base rates actually increase their yield on assets while their cost of liabilities remains largely fixed.
So even the macro risks have two sides to them.
The Bottom Line
Blue Owl Capital today feels a lot like many of the best opportunities I’ve seen over the years: strong underlying business, temporary sentiment overhang, deeply discounted valuation, and multiple positive catalysts lined up.
When a respected firm comes out with a double upgrade and basically says “the worst is priced in,” it’s usually worth paying attention.
Will the stock rip higher tomorrow? Probably not. But for anyone with a 12-24 month horizon, the risk/reward looks heavily skewed to the upside from current levels.
Sometimes the best investments are the ones that feel most uncomfortable at the exact moment everyone else is running for the exits.
Blue Owl might just be that investment right now.
