Keefe Cuts Progressive To Sell On Valuation

Keefe Bruyette downgraded Progressive stock to Sell from Hold, citing “near-record valuation gap” versus insurance peer Allstate.

Keefe Bruyette analyst Meyer Shields said that Progressive (PGR) trades at about 17.6 times the Street’s 2021 estimated earnings, which is 223% higher than Allstate’s price-to-earnings multiple of 7.9 times. Progressive’s earnings multiple is also 157% higher than the 10-year average relative multiple, said the analyst. Shields still maintained a price target of $87 (10.6% downside potential) on the stock.

The analyst added that the current valuation gap overestimates Progressive’s 2021 earnings potential as the company lowers personal auto rates. In addition, the valuation gap underestimates the strategic benefits of Allstate’s increasing focus on the independent agency channel.

Last week, Progressive reported a steep increase of 179% in August earnings per share of $0.83 on a year-over-year basis. The insurance company recorded net premiums written of $3.4 billion in the month, up 18%, while net premiums earned grew 11% on a year-over-year to about $3.1 billion. (See PGR stock analysis on TipRanks)

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 7 Buys, 3 Holds, and 1 Sell. The average price target of $98.18 implies that the shares are fully priced at current levels. Shares have gained 34.5% on a year-to-date basis.