B.Riley upgrades Ares Capital stock rating to Buy on strong performance

B.Riley upgraded Ares Capital (ARCC) to Buy, raising its price target to $23.50, citing the company's strong performance, portfolio quality, and historical resilience. The firm highlighted ARCC's adjusted net investment income matching expectations, 12% revenue growth, and robust Q2 2025 results, which included a 3% quarter-over-quarter portfolio increase to $27.9 billion. B.Riley believes ARCC's high-quality, diversified portfolio and robust credit position it to outperform its peer group, despite emerging earnings pressures across the broader BDC sector.

Analysis

B.Riley has upgraded Ares Capital (ARCC) from Neutral to Buy, increasing its price target to $23.50 from $22.50, signaling confidence in the company's fundamental strength and portfolio quality. This upgrade is supported by ARCC's recent financial performance, including an adjusted net investment income (NII) of $0.50 per share which met analyst expectations, and robust second-quarter 2025 results featuring a GAAP net income of $0.52 per share. The company demonstrates consistent growth, with revenue up 12% and its total portfolio at fair value increasing 3% quarter-over-quarter to $27.9 billion. B.Riley's positive outlook is further justified by ARCC's historical ability to preserve net asset value (NAV) and achieve above-average recovery rates during economic volatility. Despite acknowledging emerging earnings pressures across the broader Business Development Company (BDC) sector, the firm believes ARCC's high-quality, diversified portfolio, strong credit quality, and fully covered dividend create an attractive risk/reward profile, positioning it to outperform its peers.

Key Decisions for Investors

• Given the B.Riley upgrade, strong fundamentals including 12% revenue growth, and a price target suggesting upside, investors may consider ARCC a potential outperformer in the BDC sector.
• The analysis highlights ARCC's resilience during volatility; investors should monitor its portfolio credit quality and net asset value (NAV) stability as key indicators of continued outperformance against sector-wide earnings pressures.
• With a fully covered dividend cited as a key strength, income-oriented investors should track the company's core earnings per share, which were stable at $0.50 in the latest quarter, to ensure dividend sustainability.