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On Tuesday, Craig-Hallum adjusted its outlook on Porch Group Inc. (NASDAQ:PRCH) by increasing the price target to $4.00 from the previous $3.00, while maintaining a Buy rating on the company's shares. The change in valuation comes after Porch Group received a nod from the Texas Department of Insurance (TDI) for its Porch Insurance Reciprocal Exchange (PIRE), marking a significant shift in the structure of its insurance business.
The analyst firm believes that the approval by TDI will lead to a more stable insurance operation for Porch Group, reducing the impact of catastrophic weather events that have previously affected the company's profitability. This development is seen as a positive move for the company, potentially leading to a more predictable and profitable future.
Further details regarding the impact of this approval are expected to be sparse until the company's analyst day, scheduled for December. However, Craig-Hallum expressed optimism regarding the approved ~20% take rate on gross written premiums, which is at the higher end of their initial expectations.
The firm's decision to raise the price target reflects their confidence that Porch Group's transition to a reciprocal exchange will justify a higher valuation multiple. The analyst cited the major regulatory approval as a key factor in projecting a more stable earnings outlook for the company, which in turn supports the increased price target.
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