UBS Downgrades Verisk Analytics To Sell On Overvaluation And Headwinds

In a report published Tuesday, UBS analyst Alex Kramm downgraded the rating on Verisk Analytics, Inc. VRSK from Neutral to Sell, while lowering the price target from $79 to $74. The stock appears overvalued at present, especially given the expectations of potential headwinds for the company in the next few quarters.

"A softening underlying insurance industry, incremental consolidation in the end market, and VRSK's expansion into the energy vertical all represent new uncertainties to investors that could put pressure on the shares," Kramm explained.

The analyst believes that the company is facing tough comps, and that organic growth and other optics are likely to weaken from the elevated levels seen in recent times. Also, while Verisk Analytics continues to have a high quality business, the deteriorating health of the insurance end market could lead to pressure on the stock.

According to the UBS report, "Consolidation has picked up with 3 large deals announced in the past month and a half, and we do not see any signs of M&A activity slowing down. As competitive pressures and spending potential in VRSK's core underlying market heat up, we would not be surprised to see organic growth rates take a hit."

The analyst also expressed concern regarding the timing of the WoodMac acquisition, given that the energy market appears to be under pressure. "The acquisition also came at a full price, for a division that we note will likely grow at a slower rate than other DA segments," Kramm added.