Will the Blue Owl stock price ever recover? Time to catch the falling knife?

The Blue Owl stock price continued its strong downward trend on Monday as concerns about the private credit industry accelerated. It dropped to $8.45 on Monday, down substantially from the all-time high of $25, a drop that has erased billions of dollars in value.

Blue Owl stock has crashed amid fears of private credit 

OWL stock price has been pummeled this year as it faces a double whammy of rising redemptions and a slowdown in inflows.

The concerns started last year when the company attempted to merge two funds: Blue Owl Corporation II (OBDC II) and its Blue Owl Capital Corporation (OBDC), which had about $17 billion. This deal was problematic as the larger fund was trading at a 20% discount to NAV, a move that would have led to a big loss to the OBDC II investors.

The crisis escalated this week after the company halted redemptions in a key private credit fund and sold some of its assets to pay shareholders. 

Most notably, there are concerns that most of Blue Owl’s private credit funds are invested in companies in the software industry, which is being disrupted by the booming artificial intelligence industry.

This explains why other companies in the private credit sector, like Ares, Blackstone, and KKR, have continued seeing substantial outflows in the past few months. For example, one of Blue Owl’s funds experienced redemptions of over 15% in the last quarter.

Therefore, Blue Owl’s business will likely face the main challenge of increased outflows and weak inflows. Companies in the private credit and private equity industry make substantial sums of money by making a fee from its assets under management.

In its case, the company ended the last quarter with over $307 billion in assets, and $187 billion in fee-paying AUM, and $222 billion in permanent capital.

The most recent results showed that Blue Owl's business raised $42 billion in equity last year, up by 50% from a year earlier. Its fundraising for wealth-dedicated products rose by 58%. Its management revenue rose to $755 million in the fourth quarter from $631 million in the same period a year earlier.

Therefore, the question among investors is whether the Blue Owl stock price will recover from the current all-time lows. The most likely scenario is where the stock remains on edge in the foreseeable future as concerns about the industry continues. 

The stock will then rebound, possibly in 2027 as fears start to subside. A key near-term catalyst for the stock will be its earnings, which will come out on April 30th. Analysts expect the results to show that its revenue dropped to $700 million in Q1.

Blue Owl stock price technical analysis 

OWL stock chart | Source: TradingView 

The ongoing OWL stock price has crashed in the past few months. This retreat was in line with our prediction, in which we pointed to the forming head-and-shoulders pattern.

The stock has continued falling below the 50-week and 100-week Exponential Moving Averages (EMA). At the same time, the Average Directional Index (ADX) has jumped to 40, a sign that the downtrend is gaining momentum.

The Relative Strength Index (RSI) and the MACD indicators have continued falling. Therefore, the stock will likely continue falling, potentially to the key resistance level at $5. It will then rebound later this year or in 2027 as the private credit industry fears continue.