Progressive upgraded to Buy at HSBC following underperformance

HSBC analyst Vikram Gandhi upgraded Progressive (PGR) to Buy from Hold with a price target of $259, down from $267. Progressive shares have underperformed closest peer Allstate (ALL) by about 26% and the S&P 500 by about 36% since mid-April, notes the analyst, who attributes this to a combination of headwinds faced by its personal auto business given slowing policy-in-force growth driven by intense competition, increasingly fading pricing momentum and falling interest rates. However, while the firm thinks the underperformance was “justified to some extent,” it sees this presenting an opportunity as the firm notes that management emphasized on the Q3 call that it remains focused on growth, but not at the cost of profitability and the firm views regulatory moves to unlock excess capital and share buybacks being added to the capital returns mix as positives.