Should you buy Blackstone shares as it agrees to sell Cosmopolitan for $5.65 billion?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 27, 2021
  • Blackstone shares edged lower 2% on Monday after agreeing to sell Cosmopolitan.
  • The company is selling the casino and hotel business to MGM for $1.6 billion.
  • A Blackstone REIT will acquire the real estate property for $4 billion.

On Monday, Blackstone Inc. (NYSE:BX) shares declined by about 2% after agreeing to sell the Metropolitan casino and hotel business in a deal with $5.65 billion. MGM Resorts International (NYSE:MGM) is buying the hotel and casino business for $1.6 billion, while Blackstone real estate investment trust will acquire the real estate property for $4 billion.

According to Blackstone’s letter reviewed by the Wall Street Journal, the private equity firm will net $4.1 billion in profit and cash flows from the casino and hotel operations. The company bought the property for $1.8 billion seven years ago and spent an additional $500000 in upgrades and renovations.

Is Blackstone a good stock to buy in Q4 2021?

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From a valuation perspective, Blackstone shares trade at a relatively steep forward P/E ratio of 28.43 compared to the trailing P/E of 19.31. Therefore, the stock may not be appealing to value investors.

Moreover, analysts expect its earnings per share to plunge by more than 50% this year before rising at an average annual rate of about 16.16% over the next five years. As a result, long-term growth investors could find Blackstone shares as an exciting opportunity.

Source – TradingView

Is Blackstone pullback an opportunity to buy?

Technically, Blackstone shares appear to have recently pulled back after hitting new historical highs. The stock recently rallied to trade at about $136.88 before pulling back to $122.24.

However, with shares yet to hit the oversold conditions of the 14-day RSI, the pullback could continue to the foreseeable future. Therefore, investors can target extended short-term pullbacks at $116.71 or lower at $109.44. On the other hand, $128.93 and $135.47 are critical resistance zones.

Bottom line: It is not too late to short BX shares

In summary, although Blackstone looks like an exciting long-term growth stock, investors could still capitalize on short-term turbulence by shorting the stock on the downward movement.

Moreover, with shares yet to reach the oversold conditions of the 14-day RSI, there is more room to run before retesting the key support levels.

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