In a report released yesterday, Derek Hewett from Bank of America Securities maintained a Hold rating on Blue Owl Technology Finance Corp., with a price target of $15.00.
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Derek Hewett has given his Hold rating due to a combination of factors impacting Blue Owl Technology Finance Corp. The company reported a lower-than-expected Adjusted Core EPS of $0.32, which was below both the Bank of America and consensus forecasts. This shortfall was primarily attributed to yield pressure affecting top-line growth. Despite an impressive GAAP ROE of 11.7% driven by unrealized portfolio appreciation, the core profitability is expected to lag behind its peers due to the current yield/spread environment and significant excess capital that needs to be deployed.
Additionally, while the non-accruals remained effectively zero and the portfolio saw modest growth, the increase in PIK to 13.8% of investment revenue raises some concerns. The net portfolio fundings were negative, and the portfolio yield decreased slightly, indicating potential challenges in achieving robust growth. Although the NAV per share increased due to unrealized gains, the core dividend coverage was only 91%, suggesting that the company may face difficulties in fully leveraging its excess capital within the near term. These factors collectively support the Hold rating, as the stock’s current price is close to the price objective set by the analyst.
Hewett covers the Financial sector, focusing on stocks such as Blue Owl Capital, New Mountain Finance, and Barings BDC. According to TipRanks, Hewett has an average return of 4.4% and a 54.35% success rate on recommended stocks.