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On Tuesday, Citi analysts increased their price target on Beazley PLC (BEZ:LN) (OTC: BZLYF) shares to GBP9.70, up from GBP7.99, while reaffirming a Buy rating on the stock. The adjustment reflects changes in the firm's financial model and the introduction of forecasts for the fiscal year 2027.
The analysts at Citi have updated their projections, resulting in a 22% increase in profit before tax for 2024. However, they have also scaled back their expectations for the following two years, with a 4% decrease for 2025 and a 10% reduction for 2026. These revisions are primarily due to shifts in interest rates, which have impacted reinvestment yields.
In their valuation approach, Citi analysts have rolled forward their assessment to focus on the expected invested capital for 2025. They have also adjusted their cost of capital (COC), which has decreased from 10.6% to 9.2%. This change is attributed to lower risk-free rates and a less conservative view on the business risk premiums related to Beazley's Cyber and MAP divisions.
The new price target represents a 21% increase from the previous target and indicates a potential 16% upside for the stock, along with a 21% expected total return (ETR). Citi's analysts believe that Beazley's consistent performance in underwriting and capital returns will continue to support the company's stock performance, leading them to maintain an Overweight stance on the shares.
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