TPG (TPG) shares were in focus after reports that OpenAI is in advanced talks with the firm and other private equity groups to create a joint venture to distribute OpenAI’s enterprise products.

The OpenAI talks arrive during a weak patch for TPG’s share price, which has a 1 month share price return of 9.95% and a year to date share price return of 40.53%, even though the 3 year total shareholder return is 49%. This suggests that longer term holders have still seen gains while recent momentum has faded.

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With TPG trading at US$39.10, which reflects an implied 18% discount to one intrinsic value estimate and a 40% decline year to date, investors have to ask whether this weakness is a chance to buy or whether the market is already pricing in future growth.

Most Popular Narrative: 43.2% Undervalued

At $39.10, the most followed narrative for TPG points to a fair value of about $68.87. The key question is what assumptions support that gap.

Expansion into private wealth and retail, for example T POP and TCAP, and insurance channels is driving a diversified, stable fee stream and increasing management fee margins. This is positioning TPG to benefit from the long term industry trend of rising wealth and institutional demand for alternatives, which supports topline growth and net margin stability.

Want to see what sits behind that confident fee story? The narrative leans on shifting revenue mix, rising margins, and a future earnings profile that looks very different from today.

Result: Fair Value of $68.87 (UNDERVALUED)

However, there is still a chance that softer private equity fundraising or tougher exits in volatile deal markets could pressure fee income and carried interest expectations.

Another Angle On Valuation

The AI narrative leans on future earnings and fair value, but today TPG trades on a P/E of 50.6x versus 30.8x for the US Capital Markets industry and a fair ratio of 23.8x. That is a wide gap, so is the market overpaying for the story, or are the models too cautious?

Next Steps

Mixed signals in the story so far? Take a moment to review the numbers, weigh the concerns and potential upsides, and size up the 3 key rewards and 1 important warning sign.

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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.