Apollo Global stock has underperformed the market this year as jitters in the private credit industry have escalated. APO dropped to $124.15, down by 13.60% from its highest level in August this year. So, is this retreat a good buying opportunity for the stock?
Apollo Global private credit redemptions are continuing
There are signs that challenges in the private credit industry are continuing. Apollo Global, one of the biggest players in the industry, announced that it was capping redemptions in the third quarter.
Investors in Apollo Debt Solutions BDC (ADS) sought to withdraw roughly 14.7% of shares in the latest tender offer. While high, the figure was better than 16.8% in the second quarter and is a sign that pressures are easing.
This trend is happening across other similar vehicles. HPS Corporate Lending Fund had 11.5% in Q3 from 13.3% in the second quarter. North Haven Private Income Fund had 11.4% from 11.6%, while Oaktree Strategic Credit Fund had 3.8% from the previous 4.5%.
In its statement, Apollo noted that investors who have sought liquidity this year have received about 75% of their requested capital.
Therefore, while redemptions are a big issue, there are signs that the situation is improving, which is a good thing.
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Apollo’s business is doing well despite rising challenges
Apollo Global’s business is doing well despite the rising challenges in the industry. Its most recent results showed that its revenue jumped to $11.1 billion in the second quarter from $6.8 billion in the same period last year.
This performance is important because of how Apollo makes money. Like other private equity and credit companies, it makes money in various ways, including management fees, interest, and investment income.
Its management fees is dependent on the assets under management, which have continued rising. Its total AUM jumped to $1.047 trillion, while the fee-generating AUM rose to $858 billion.
Apollo’s profits also continued rising during the quarter. Its net income jumped to $1.33 billion from $605 million a quarter earlier. Its first-half loss was $594 million, primarily driven by a one-time tax expense of $1.7 billion.
Analysts are largely bullish on Apollo stock. Data compiled by Kyro shows that JPMorgan’s Kenneth Worthington maintained his overweight rating, with a price target of $154. UBS has a buy rating and a target of $172, while Morgan Stanley has a target of $164.
Apollo Global stock price analysis
APO stock chart | Source: TradingView
The daily chart shows that APO stock has slumped in the past few weeks, erasing some of the gains made in July and mid-August. It has slumped from a high of $143 to the current $124.
The stock has slumped below the 50-day moving average and the 38.2% Fibonacci Retracement level. This retracement connects the lowest level in March and the highest point on August 14.
Apollo Global has also moved below the Supertrend indicator, which is a sign that bears are in control for now. Therefore, the path of the least resistance is downwards, with the next key level to watch being at the 61.8% retracement point at $116.
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