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NEW YORK (
BlackRock (BLK - Get Report)can continue to grow despite $3.6 trillion in assets under management, and other fears around the stock are overblown, Citigroup analysts argued in upgrading the shares to buy from neutral Monday.
Citigroup analyst William Katz raised his price target by $30 to $220--14.5 times his 2013 earnings estimates, which he also moved higher in Monday's report. BlackRock shares closed Friday at $187.39.
BlackRock shares have been held back by fears the money manager's exchange traded fund revenues will suffer from a price war with Vanguard, CEO Larry Fink could become President Obama's next Treasury Secretary, or the company may be designated a systemically important financial institution (SIFI) and subjected to tighter regulation, according to the report.
Katz argues these fears are overblown. He believes a move by Vanguard to use a cheaper benchmark from University of Chicago for its indices, rather than MSCI, will result in many institutional money managers sticking with BlackRock ETFs. He sees 3% growth for BlackRock's ETF business in 2013, consistent with industry trends. Katz also believes CEO Fink has tried to allay concerns he wants to be the next Treasury Secretary, but adds that the company is mature enough at this point that it can continue to grow without Fink if need be. Finally, he believes regulators do not have a strong case to designate BlackRock a SIFI, despite widespread concerns over the money market industry.
Written by Dan Freed in New York.