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New: Introducing “Why Is It Moving?” - lightning-fast, AI-driven explanations of stock moves
Two analysts felt the need to update their takes on the insurer.
Neither report boosted the buy case for the shares, however.
Veteran insurance company Progressive (NYSE: PGR) suffered a case of the Mondays on the first stock trading day of this week. Its shares took a nearly 3% hit that session, on the back of two pessimistic analyst updates. Additionally, this occurred on a day when the S&P 500 (SNPINDEX: ^GSPC) traded up, rising by 1.1%.
Of the pair, the more impactful was the one issued by Bob Huang of white-shoe investment bank Morgan Stanley. Huang downgraded his recommendation to underweight (i.e., hold) from his previous rating of equalweight (neutral). He accompanied this with a substantial price target reduction to $265 per share -- previously, he had flagged the stock as being worth $265 apiece.
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Image source: Getty Images.
According to reports, Huang's main concern is that Progressive is entering a cycle where pricing power for insurers will be weaker. Given that the pricing of premiums is critical to an insurance company's fundamentals, this is sure to impact key line items for the company.
The analyst believes this will have enough of a negative impact for Progressive to post per-share earnings declines in both 2026 and 2027.
Compounding that, Huang's peer Alex Scott of Barclays also reduced his price target, although he left his recommendation of equalweight unchanged. Scott's new fair-value assessment is $257 per share, down from the preceding $271.
Pessimism is in the air with Progressive at the moment; last week, the company released discouraging preliminary third-quarter results. Although it showed decent growth in certain line items, it failed to meet analyst estimates for the period.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Progressive. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
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