BlackRock Buys Stake In Authentic Brands Group

BlackRock Inc. (Ticker Symbol: BLK) announced over the weekend that they would be buying a 30% stake in the brand management company Authentic Brands Group LLC.  BlackRock has agreed to an $875 million dollar deal, which would value Authentic Brands Group between $4 and $4.5 billion, including debt.  Authentic Brands Group is the parent company of the widely read Sports Illustrated magazine.  The company also owns more than 50 athletic, entertainment, apparel, and consumer brands including Nine West, Juicy Couture, and Hervé Léger.

The announcement comes on the heels of BlackRock’s second-quarter earnings release.   The company reported quarterly net inflows of $151 billion. BlackRock reported a 2% decrease in revenue for the quarter along with an 11% decrease in operating income. However, the asset manager did report a 20% growth in technology services revenue, which was a highlight from the report.

BlackRock’s stock had a soft start to 2017, finding support around the $370.00 price level and putting in a Double Bottom reversal pattern. This pattern occurs when the price of an asset reaches a low price, has a small rally, then retests that low, failing to break below it.  The pattern is confirmed once it breaks above the high between the two prior lows.  The stock broke from its pattern and continued to rallying almost 50% and notching in an all-time high of  $594.52 early in the first quarter of 2018.  However, in 2018, BlackRock stock began to trade in a descending triangle consolidation pattern, where the bottom part of the triangle appears flat and the top part of the triangle has a downward slant.  BlackRock broke down from that pattern and began a downtrend, giving back all of the stock gains from the previous year.

Late in the fourth quarter of 2018, BlackRock’s stock began to form a bullish divergence pattern, where the stock makes a lower low in price, but the Relative Strength Index makes a higher low, as indicated on the chart by the green lines. Traders and investors sometimes look at divergences for a possible pause within the current trend, which can at times lead to a reversal, as occurred in BlackRock’s case. After putting in a bullish divergence, the stock broke through its downtrend line it began from 2018. BlackRock’s shares continued to proceed higher, developing what seems to be a Double Top reversal pattern. This pattern occurs when the price of an asset reaches a high price, has a small sell-off, then retests that high failing to break above it.  The pattern will be confirmed once it breaks through its neckline of roughly $410.00.

(Chart above courtesy of ​​)

Based on a survey of 6 analysts offering 12-month price targets, the average price target for Blackrock’s stock is $523.40.  According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $416.67.

BlackRock is currently the world’s biggest asset manager with over $6 trillion in assets under management and growing. The company recorded a positive quarterly report, added new ventures in the pipeline, and has continued to have fresh fund inflows coming into the firm. Investors in BlackRock should look to see how the stock reacts if it trades below its Double Top neckline under $410.00, which indicates a technical price target below its 2017 and 2018 lows which are around the $360.00 price level.