Rothschild Redburn downgrades Verisk Analytics stock to Sell on growth concerns

Investing.com - Rothschild Redburn downgraded Verisk Analytics (NASDAQ:VRSK) from Neutral to Sell on Thursday, while reducing its price target to $220.00 from $280.00, representing a potential 10% downside. The stock, currently trading at $243.98, has already declined 16.25% over the past six months, according to InvestingPro data.

The downgrade comes as Rothschild Redburn expects Verisk’s top-line growth to slow as pricing outlook and industry net written premiums growth normalize for insurance carriers, following a period of high inflation that had previously supported pricing and product sales. Despite maintaining impressive gross profit margins of 69.4%, InvestingPro analysis indicates the stock is trading at elevated multiples, with a P/E ratio of 37.8x and high EBITDA valuation multiples relative to peers.

Verisk has been among the strongest stock performers in the data and analytics sector since divesting its Financial Services and Energy and Specialised Markets businesses in 2022 and 2023, according to the research firm.

The firm noted that Verisk management is accelerating both inorganic and organic investments in response to slowing growth, which coincides with increased costs across the industry as data providers upgrade legacy solutions and datasets for artificial intelligence.

Rothschild Redburn cited slowing organic top-line growth, margin expansion challenges, increasing financial leverage, falling return on invested capital due to inorganic growth, and rising threats from AI-native competitors as factors making Verisk’s premium valuation relative to the sector "unsustainable."

In other recent news, Verisk Analytics has announced a partnership with Jopari Solutions to enhance the efficiency of insurance medical record reviews using artificial intelligence and data analytics. This collaboration aims to integrate Verisk’s AI-powered models with Jopari’s extensive electronic delivery network, potentially reducing manual processing time and improving decision-making accuracy. Additionally, Verisk launched XactAI, a suite of AI tools designed to automate various administrative tasks in claims processing, further advancing the company’s technological capabilities in the insurance sector.

In the realm of analyst activity, Seaport Global Securities has initiated coverage on Verisk Analytics with a Buy rating, setting a price target of $280. The firm highlighted Verisk as a "top defensive pick" due to its stable recurring revenue from its Insurance Services Office. Meanwhile, RBC Capital has reiterated its Outperform rating for Verisk, with a price target of $314, anticipating a modest organic growth beat of 7.3%. The firm expects Verisk to maintain its fiscal year 2025 guidance despite potential challenges.

In leadership news, Verisk has appointed Saurabh Khemka as the president of Underwriting Solutions. Khemka, who has been with the company for over 12 years, will now oversee all operations within the Underwriting Solutions business. These developments mark significant strides for Verisk in both technological advancements and strategic leadership.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.