How Apollo Global Management Stock Fits Into The Current AI Debate

Apollo Global Management (APO) has moved into the center of the AI conversation after publishing a white paper that links artificial intelligence adoption with slower wage growth, especially for lower paid workers.

The paper highlights a gap in wage outcomes between occupations with high AI exposure and those with lower exposure following the rollout of tools such as ChatGPT. For investors looking at Apollo Global Management stock, the findings raise questions about how AI may influence consumer demand, labor costs, and long term economic trends that shape asset values.

At a share price of US$125.59, Apollo Global Management has seen a 1 month share price return of 6.04%, while the share price is down 14.34% year to date and the 3 year total shareholder return is 52.87%. This points to longer term gains despite weaker recent momentum.

If Apollo Global Management’s role in the AI conversation has your attention, you might also want to see what else is moving in related areas by checking out 55 AI infrastructure stocks

Apollo Global Management has delivered solid multi year gains even as this year’s pullback lingers. Is the recent weakness just sentiment resetting after the AI spotlight, or a signal that the business now justifies a different valuation?

Preferred P/E Multiple Of 62.7x: Is It Justified For Apollo Global Management?

Apollo Global Management currently trades on a P/E of 62.7x. That is a rich headline number for a diversified financials company at a last close of $125.59.

The P/E ratio compares the share price with earnings per share. For a group like Apollo Global Management that earns fees on assets and invests its own capital, a higher P/E can sometimes reflect expectations for stronger profit growth or the quality and visibility of those earnings.

Here, the picture is mixed. On one hand, Apollo Global Management has grown earnings significantly over the past five years and its earnings are expected to grow faster than the wider US market. On the other hand, earnings declined over the past year and profit margins of 3.7% were lower than 15.1% a year earlier, which may make such a high P/E harder to support if that pattern continues.

Compared with both the US Diversified Financial industry average P/E of 14.7x and the peer average of 35.3x, Apollo Global Management’s 62.7x multiple stands out as much higher. It also sits well above an estimated fair P/E of 26.3x, which indicates a level that the market could move towards if expectations normalise.

Result: Price-to-Earnings of 62.7x (OVERVALUED)

However, Apollo Global Management’s high P/E and recent share price pullback could be pressured further if fee growth softens or AI related wage effects affect client inflows.

Another View On Apollo Global Management’s Valuation

While the P/E points to Apollo Global Management looking expensive, the SWS DCF model suggests the stock at $125.59 is trading below an estimated future cash flow value of $149.44. That implies a discount. Which signal do you put more weight on?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Apollo Global Management for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With Apollo Global Management caught between AI enthusiasm and valuation questions, it makes sense to move fast and weigh the trade off yourself using the company's 2 key rewards and 3 important warning signs 2 key rewards and 3 important warning signs

Looking For More Investment Ideas Beyond Apollo Global Management?

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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.