Why Progressive Stock Wilted on Wednesday

On Wednesday, investors felt that they couldn’t make a lot of portfolio progress with Progressive (PGR -3.56%). The insurance company’s stock was hit with a sell-off following an analyst’s price target cut; on the back of this, it closed the day almost 4% down in price. That performance compared most unfavorably to the rising S&P 500 index, which rose by 1.1%.

Snip, snip

The man with the scissors was Joshua Shanker of Bank of America Securities. He now feels Progressive is worth $300 per share, down from his previous level of $318. Despite the price target cut, Shanker is still a Progressive bull, as he maintained his buy recommendation on the insurer.

This isn’t the analyst’s one and only chop on the Progressive price target. Last week, Shanker cut his $333 per share assessment to that $318.

The reasoning behind the pundit’s move wasn’t immediately apparent. Keeping the buy tag on Progressive seems like the correct decision, as the company published its results for February.

These revealed double-digit increases in key metrics. For example, net premiums written rose by 17% year over year to $6.68 billion. The combined ratio, a crucial yardstick for insurers, fell 4.2 percentage points to 82.6%.

Focus on the important news

In the insurance business, the lower the combined ratio, the better, so Progressive’s pronounced decline is admirable. If I were an investor, I’d be more encouraged by the February numbers than unhappy about the analyst price target cut. This company is doing better than its recent stock performance would indicate, and it probably didn’t deserve that Wednesday sell-off.