In a case of damning with faint praise, Progressive(NYSE: PGR) stock took something of a hit on Thursday. An analyst initiated coverage of the stock, pointing out several positives and negatives that might affect its price. Investors clearly concentrated more on the latter, as they bid said price down by almost 2% during the trading session. That put it more deeply in the red than the bellwether S&P 500 index, which fell by 0.3%.
Coverage launched by international bank
Barclays's Alex Scott formally launched his tracking of Progressive's equity just after market hours on Wednesday. The analyst opened with an equalweight (read: hold) recommendation and a $267 per share price target on the insurer's stock.
As he tagged Progressive with the equivalent of a hold rating, he pointed out several negatives and positives about the company in his inaugural research note. Pluses for its future include potential avenues for growth. However, he expressed concern that the personal auto insurance segment could be heading into a "softer" market with heavy pricing competition coming sooner than many expect.
Additionally, Scott wrote, "We don't see much industry-level growth for this market, and Progressive already has a 15% market share."
Future opportunities?
Still, the prognosticator didn't entirely write off Progressive's future potential, especially given the apparent strategy of top competitor GEICO. Scott wrote that GEICO's assertive pullback from the market leaves something of a vacuum for the competition to fill.
Such a retreat could also lead to an industrywide decline in marketing costs, as GEICO is a very active advertiser. That, in turn, might lead to greater profitability, assuming premiums don't drop too significantly.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Progressive. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
