KKR (KKR) shares have been reacting to news that the firm was selected alongside Carlyle to help the US Army build and operate a large AI capable data centre on a military base.
See our latest analysis for KKR.
The US Army data centre decision comes after a mixed run for KKR, with a 3.54% 1 day share price return and a 2.85% 7 day share price return contrasting with a 90 day share price decline of 29.69%. At the same time, the 3 year total shareholder return of 87.32% shows how different short and long term trends can look.
If this AI related contract has your attention, it could be a good moment to scan other infrastructure names supporting AI workloads using the 36 AI infrastructure stocks
With the shares down 29.69% over 90 days but still showing an 87.32% 3 year total return, and trading at a discount to the US$131.03 analyst price target, is there real value here, or is the market already pricing in future growth?
Most Popular Narrative: 33% Undervalued
At a last close of $93.96 versus a narrative fair value of $140.24, KKR is framed as materially undervalued, with that gap hinging on how its fee engine and monetization pipeline evolve from here.
Strong and accelerating fundraising momentum across asset classes, especially with institutional investors and the fast growing private wealth or retail segment, are expanding fee paying AUM and supporting double digit management fee growth, with further upside from new distribution initiatives (e.g., partnership with Capital Group and insurance third party capital). This is likely to positively impact future revenue and management fees.
Read the complete narrative. Read the complete narrative.
Want to see what is baked into that valuation gap? The core of this narrative is a focus on an earnings ramp built on fee growth, margin expansion, and a richer mix of performance revenues over time. Curious which specific assumptions on revenue trajectory, profitability, and exit activity are required for $140.24 to be justified? The full narrative lays out those numbers in detail.
Result: Fair Value of $140.24 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, this hinges on continued fundraising and private credit momentum. Any hit to asset quality or carried interest realizations could quickly test that undervaluation story.
Find out about the key risks to this KKR narrative.
Another Way To Look At Value
The fair value narrative points to KKR trading 33% below $140.24, but the current P/E of 37.4x tells a different story. It is higher than the fair ratio of 24.4x, the US Capital Markets average of 37.3x, and the peer average of 29.8x. This suggests less room for error if growth assumptions slip. So which signal matters more to you: the discount to fair value or the rich earnings multiple?
See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
The mixed signals here may leave you curious rather than convinced, so treat this as your prompt to review the drivers yourself. If you form a clear stance, move quickly by checking the 1 key reward.
Looking for more investment ideas?
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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