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On Thursday, Raymond (NS:RYMD) James analysts downgraded Hagerty Inc. (NYSE:HGTY) stock from Market Perform to Underperform. The downgrade comes despite the firm's recognition of Hagerty's position as a leading marketplace for classic and collectible vehicles.
The company, currently valued at $910 million, has demonstrated strong momentum with a 29.6% year-to-date return. Analysts anticipate robust top-line growth in 2025, driven by strategic partnerships and an expanding membership base, building on its impressive 21% revenue growth over the last twelve months.
The analysts noted that Hagerty is currently trading at approximately 34 times their estimated earnings per share (EPS) for 2025. This valuation is significantly higher than the average of around 17 times 2025 estimated EPS for the Personal Auto industry peers and about 22 times for the Insurance Brokerage & Technology peers. The valuation gap was a key factor in the decision to downgrade the stock.
In addition to the EPS multiple, Hagerty's enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio for 2025 is estimated at around 18 times. This figure exceeds the brokerage and technology peer average of roughly 14 times. The analysts believe that the premium valuation reflects the optimistic growth prospects but also presents a concern that prompted the rating change.
The downgrade reflects a cautious stance on the stock's current valuation relative to its peers. Despite the positive outlook for Hagerty's business growth, the analysts at Raymond James suggest that the stock's pricing may be ahead of its market comparables. The firm's analysis indicates that Hagerty's financial metrics are being valued more richly than those of its peers, which has led to the rating adjustment.
Investors in Hagerty Inc. will be watching closely to see how the company's strategic initiatives unfold over the coming year and whether the growth expectations align with the current market valuation. Raymond James' downgrade serves as a note of caution regarding the stock's pricing in the context of the broader industry.
Interestingly, InvestingPro analysis suggests the stock may be undervalued at current levels, with multiple ProTips and detailed valuation metrics available to subscribers. For comprehensive insights into Hagerty's financial health and growth prospects, investors can access the full Pro Research Report, part of InvestingPro's coverage of over 1,400 US stocks.
In other recent news, Hagerty reported a robust growth in its third-quarter 2024 earnings call, despite facing industry challenges. The collectible car insurance leader witnessed a 20% surge in total revenue, reaching $323 million, and added a record 275,000 new members. This contributed to a 16% growth in written premium for the year.
The company posted an operating income of $60 million and adjusted EBITDA of $105 million, even after enduring $25 million in losses from Hurricane Helene. Hagerty's anticipated total revenue for 2024 stands at approximately $1.18 billion, with a projected net income between $65 million and $74 million, inclusive of the impact of recent hurricanes.
In addition, the company plans to launch its Enthusiast Plus business in early 2025. These recent developments underscore Hagerty's commitment to enhancing member experience amid industry challenges. The company's financial performance and future plans reflect its resilience and adaptability in a dynamic market environment.
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