On Thursday, Cantor Fitzgerald raised its rating on shares of Root, Inc. (NASDAQ: ROOT) from Neutral to Overweight, while also increasing the price target to $13.00 from $9.00. The firm recognized Root's significant operational improvements in the latter half of the previous year, which included tightened underwriting and a best-in-class loss ratio.
The upgrade comes after Root demonstrated an enhanced ability to acquire new policies with healthy loss ratios, leading to a substantial improvement in its operating loss, narrowing from -$263M in 2022 to -$101M in 2023. Additionally, the company reached a breakeven adjusted EBITDA in the fourth quarter of 2023.
Cantor Fitzgerald highlighted the company's positive trends since the beginning of the year, expressing confidence that Root is well-positioned to capture profitable market share in 2024 by continuing its recent strategic execution. The firm also noted that in the event of increased industry competition, Root has the flexibility to prioritize profitability over near-term growth.
The analyst from Cantor Fitzgerald projected that, assuming a stable macro environment, Root could achieve profitability in the first half of 2025. The firm believes that the current market valuation of Root does not fully reflect the company's fundamental improvements or its strategic flexibility moving forward into 2024.
The positive outlook is further supported by key takeaways from a recent Fireside Chat with Root's CEO, Alex Timm, where details of Root's fundamental turnaround were discussed, providing a basis for the analyst's upgraded rating and price target.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.