On Wednesday, Progressive Corp (NYSE:PGR) received an upgrade from Morgan Stanley, shifting from an Equalweight to an Overweight rating. Accompanying this upgrade, the firm also increased the price target for Progressive's shares to $227.00, up from the previous $185.00.
The upgrade was based on the insurance company's potential to expand its market share significantly in the coming years.
Morgan Stanley highlighted Progressive's "strong culture of tech innovation" and a "favorable competitive environment" as key drivers that could enable the company to surpass the market's growth. The firm projects that Progressive could capture over 18% of the personal auto market share by the end of 2028, a notable rise from around 15.4% in 2023.
For the near term, Morgan Stanley anticipates that Progressive will see personal auto premium growth of approximately 19% in 2024, slightly above the consensus estimates of around 18% for the same year. This expectation is set against a backdrop of mid-single-digit growth forecasted for the industry over this period.
The report outlined three main factors that are likely to contribute to Progressive's growth above industry levels. First is the company's innovative approach to technology, including the early adoption of telematics. Second is Progressive's strong competitive position, which could allow for growth without the pressure of fierce competition. Third is the potential for mix shift opportunities through market segmentation and moving upmarket.
Morgan Stanley's assessment suggests that Progressive stands in a structurally advantageous position relative to its peers, which may lead to an increase in market share over the long term. The firm's positive outlook on Progressive's strategic direction and market potential informed the decision to upgrade the stock to Overweight.
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