Apollo Global Management (APO): Earnings Picture Improving, Technicals Show Signs Of Life

The Financials sector has seen volatility this year, but the group is up more than eight percentage points on the S&P 500 (total return) so far in 2022. Another jump up in rates over the last few weeks has helped the Financial Select Sector SPDR ETF (XLF) inch closer to its year-to-date relative high against SPY. One alternative asset manager features a bullish technical turnaround along with significant earnings growth. Are more gains ahead for Apollo? Let’s jump in.

Financials Back on the Relative Rise

According to Bank of America Global Research, Apollo Global Management (NYSE:APO) is one of the largest alternative asset managers in the world and offers investment solutions for institutions and individual investors across the risk-return spectrum in yield, hybrid, and equity. It has offices worldwide, was founded in 1990, and was publicly listed on the NYSE in 2011.

The New York-based $36.8 billion market cap Diversified Financial Services industry company within the Financials sector has negative trailing 12-month GAAP earnings and pays an above-market 2.5% dividend yield, according to The Wall Street Journal. Back in November, Apollo topped analysts’ earnings estimates along with reporting a big 175.9% year-on-year rise in revenue from the same quarter in the previous year. It also declared a $0.40 quarterly dividend.

On valuation, analysts at BofA see earnings rising strongly in 2022 with further EPS acceleration seen in 2023. Per-share profit growth is then seen as moderating, though still rising at a strong rate, by 2024. Dividends should remain at $1.60 annually, keeping the yield in check. Both APO’s operating and GAAP P/Es appear attractive given anticipated earnings growth.

BofA upgraded shares in September due to an improved valuation, and the 3Q222 left the bank bullish on the firm’s positive results. They see Apollo as a ‘defensive source of growth’ through its insurance business. Some of the firm’s alternative asset manager peers could provide higher growth, but those might also endure higher risk in an uncertain 2022.

Apollo: Earnings, Valuation, Dividend Forecasts

Looking ahead, corporate event data provided by Wall Street Horizon show an active upcoming stretch for APO. The management team is expected to present at a trio of corporate gatherings through early February. Mixed in the middle is the firm’s unconfirmed Q4 2022 earnings report.

Corporate Event Calendar

The Technical Take

APO peaked back in November 2021 above $80 but then plunged almost 50% to a low near $46 in June. That level was successfully retested in October of this year, marking a bullish double-bottom formation. The stock then rallied back above its 50 and 200-day moving averages as well as rising above key resistance around $60 to $61. The chart looks decent here so long as that zone holds. If it breaks, though, there’s a bearish head and shoulders that would be in play with a target back down to about $51 based on the size of the neckline to the $69.90 head. If a breakout above the December high takes place, though, then the 2021 peak could be in play. Overall, I like the apparent trend reversal, and APO looks good so long as $60 holds.

Back in the summer, I noted key support at $45 while the shares exhibited some value. $45 indeed held, so I am now upgrading the stock. An upbeat Q3 report also supports the value case better now.

APO: Shares Break the Downtrend, Holding $60

The Bottom Line

With a still-solid valuation picture and improved technical situation, I see the case for further upside in APO. Traders should monitor key price levels while long-term investors should like the low P/E.