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On Friday, Jefferies analyst Andrew Andersen downgraded Skyward Specialty Insurance Group (NASDAQ:SKWD) stock rating from Buy to Hold and adjusted the price target to $59 from the previous $62. The insurance group, currently trading at $52.15 with a market capitalization of $2.09 billion, has shown strong momentum with a 43.74% return over the past year. According to InvestingPro analysis, the stock appears slightly overvalued at current levels. Andersen's assessment is based on the company's performance relative to its peers and market expectations.
Skyward Specialty's stock valuation has recently aligned more closely with its peer group in terms of price-to-book ratio excluding accumulated other comprehensive income (P/B ex AOCI). Andersen notes that the company has largely completed its re-rating process. He suggests that a positive outlook on the stock would now depend on a bullish stance on the Excess & Surplus (E&S) insurance market and Skyward Specialty's potential to gain market share amid rising competition.
Despite the E&S market's current favorable conditions, Jefferies anticipates the growth differential between the E&S and traditional markets to diminish in 2025 and beyond. This projection follows a period of significant growth for the E&S sector.
Andersen's earnings per share (EPS) estimates for Skyward Specialty remain above the consensus for the next few years. However, the price-to-book multiple assigned by Jefferies, at 2.5 times, reflects a cautious approach, aligning with the recent average multiples observed in the market.
The downgrade reflects Jefferies' position on the stock's future performance, considering the broader industry dynamics and Skyward Specialty's relative market position. This adjustment in rating and price target follows the firm's initial coverage that began in December 2023, marking a shift in expectations for the insurance group's stock. For deeper insights into SKWD's valuation and growth prospects, InvestingPro subscribers can access the comprehensive Pro Research Report, which includes detailed financial analysis and 8 additional ProTips about the company's performance and outlook.
In other recent news, Skyward Specialty Insurance Group's financial performance and analyst ratings have been the focus of attention. Keefe, Bruyette & Woods maintained their Outperform rating on Skyward Specialty, with a price target of $62.00, citing the company's robust earnings and reserve management strategies. The analysts have left their earnings per share (EPS) estimates unchanged at $3.45 for 2025 and $4.05 for 2026. Additionally, Jefferies also raised its price target to $62.00, maintaining a Buy rating, following a positive outlook on the company's quarterly performance and future guidance.
Conversely, Wolfe Research downgraded Skyward Specialty from Outperform to Peer Perform, noting concerns about its trading multiples compared to historical averages. The firm set a fair value range of $50 to $59 for the company by the end of 2025. In corporate developments, Skyward Specialty appointed Patricia Ryan as its new General Counsel, succeeding Leslie Shaunty, who will retire after nearly 12 years with the company.
These developments reflect a mix of confidence and caution from analysts and signal ongoing strategic adjustments within the company. Skyward Specialty's management anticipates completing significant underwriting actions in California by early 2025, which is expected to stabilize operations. The company's focus on maintaining conservative loss ratios and managing submission flows remains pivotal as it navigates the evolving insurance landscape.
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