On Thursday, CFRA announced a price target increase for Progressive Corp (NYSE:PGR) to $215 from $185, while keeping a Hold rating on the stock. The new target is based on a valuation of 20.9 times CFRA's 2025 operating earnings per share (EPS) estimate, which has been increased by $0.55 to $10.30, and 24.2 times the 2024 operating EPS estimate, now raised by $0.70 to $8.90.
The firm expects Progressive to achieve operating revenue growth of 15% to 20% in 2024, attributing this to a projected 15% to 20% increase in earned premiums. This growth is anticipated to surpass the industry average forecast of 7% to 10%. Progressive's success is attributed to its strong insurance pricing environment and superior underwriting platforms, which are expected to facilitate growth that outpaces its peers.
Despite the positive outlook on revenue growth, Progressive has faced challenges with claim cost inflation, which saw loss costs rise by 20% in 2023. However, CFRA predicts this trend will ease in 2024 and 2025. The firm commends Progressive for its franchise strength and technological advancements in underwriting, which are believed to support the stock's premium valuation compared to its peers.
Nevertheless, CFRA considers the stock to be fairly valued at present, trading at 22.4 times their 2024 EPS estimate, in line with historical averages. The assessment reflects a balance between Progressive's growth prospects and the current market valuation.
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