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Why Did Goldman Sachs Downgrade Progressive?

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Shares of Progressive Corp (NYSE: PGR) were slightly down Tuesday after analysts at Goldman Sachs downgraded the stock from Buy to Neutral. The firm justifies the demotion saying that many of the catalysts that they had identified in their upgrade last year have passed, "and the seasonality from this point forward is less beneficial as PGR's book skews towards recreational vehicles that garner more use in the spring and summer."

Shares traded recently at $27.42, down 0.9 percent.

The research firm set a 12-month price target of $28, which implies approximately 1.3 percent upside, compared to the 1.9 percent average downside projected for the rest of the property and casualty underwriter group.

According to a report rolled out Tuesday morning, there are four more reasons behind the downgrade:

  • Progressive Corp is increasing its reliance on commercial auto. Being a more volatile line (when compared to personal lines), margins could feel the pressure of competition at any time.
  • "PGR's Agency channel continues to experience pressure as unit growth declined in 2014 despite PGR reversing its rate-taking actions from the prior year."
  • "Pending ARX acquisition creates near-term execution risk, longer-term volatility risk"
  • Progressive Corp's "recent track record of annual ‘special' dividends may have come to an end as capital may be re-routed to support the roll-out of ASI."

Latest Ratings for PGR

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Nov 2020BarclaysInitiates Coverage OnUnderweight
Oct 2020Raymond JamesMaintainsStrong Buy

View More Analyst Ratings for PGR
View the Latest Analyst Ratings

 

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Posted-In: Goldman SachsAnalyst Color Downgrades Price Target Analyst Ratings

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StockFirmActionPT
PMTB of A SecuritiesMaintains18.5
IVRB of A SecuritiesMaintains3.0
EFCB of A SecuritiesMaintains15.5
NYMTB of A SecuritiesMaintains3.5
NLYB of A SecuritiesMaintains8.5
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