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On Monday, Keefe, Bruyette & Woods analyst Ryan Tomasello increased the price target on Porch Group Inc. (NASDAQ:PRCH) shares to $6.00, up from the previous target of $3.50, while keeping a Market Perform rating on the stock. The adjustment follows Porch Group’s announcement of its fourth-quarter Adjusted EBITDA of $42 million, which surpassed both KBW’s and the consensus estimate of $33 million, despite falling short on revenue expectations.
Porch Group, which recently completed a reciprocal exchange transaction, is now poised for growth and has raised its 2025 guidance while reaffirming its 2026 and long-term targets. Tomasello noted that the new price target reflects the incorporation of the new reciprocal exchange structure and the management’s updated guidance and targets. The new target is based on 14 times the projected 2026 EBITDA. InvestingPro analysis indicates the stock is trading near its Fair Value, with 12 additional exclusive ProTips available for subscribers.
The analyst also pointed out that while Porch Group’s unique structure, business mix, and high leverage add complexity to its valuation, the company’s insurance business, in particular, may warrant a discount until it demonstrates independent scalability and the ability to deconsolidate the business with a recapitalization.
Tomasello remarked on the potential volatility of Porch Group’s stock, suggesting that it might relinquish some of its gains following what he presumes to be short covering. Despite the price target increase, the Market Perform rating indicates a neutral stance on the stock’s near-term trajectory. The analyst’s comments reflect a cautious optimism about Porch Group’s ability to execute its strategy and return to growth mode.
In other recent news, Porch Group Inc. reported its fourth-quarter earnings for 2024, revealing a revenue of $100.4 million, which was below the forecasted $110.26 million. Despite this revenue miss, the company surpassed profitability expectations with an adjusted EBITDA of $41.8 million, marking a significant increase from the previous year. Analysts at Keefe, Bruyette & Woods raised their price target for Porch Group to $6.00 from $3.50, maintaining a Market Perform rating, while Benchmark increased its target to $10.00, reiterating a Buy rating. Loop Capital also upgraded the stock from "Hold" to "Buy," maintaining a $6.00 price target, highlighting Porch Group’s strong financial health and strategic initiatives.
Porch Group’s management has raised its financial outlook for 2025, setting revenue guidance between $390 million and $410 million, and an adjusted EBITDA target of $55 million to $65 million. The company is focusing on growth in the homeowners insurance market and aims to achieve $500 million in gross written premium in 2025. Porch Group’s strategic decision to restructure its insurance business into a Reciprocal Exchange insurance model is expected to enhance profit margins and reduce financial risk. Analysts have expressed optimism about the company’s future prospects, with Benchmark’s Daniel Kurnos noting potential catalysts on the horizon and expressing confidence in the company’s leadership and business transformation.
Additionally, Porch Group’s transition to a commission and fee-based insurance services model is anticipated to result in higher margins and more predictable earnings. The company aims to maintain an 80% gross margin and improve its EBITDA margin by over 1000 basis points in 2025. Porch Group’s management has also reaffirmed its target of $100 million adjusted EBITDA for 2026, with plans to scale its insurance business significantly over the next five to ten years. Analysts have noted that Porch Group’s unique structure and diverse business mix contribute to the complexity of its valuation, with the insurance segment being a key focus for future growth.
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