Root Receives Mixed Reviews for Its Online Insurance Business

Root's underwriting performance 'raises questions' that the nascent business model doesn't answer yet, says Deutsche Bank.
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Root  (ROOT) - Get Report shares stumbled Monday after the online auto/renters insurance platform received mixed reviews from analysts.

Root shares recently traded at $17.66, down 7.05%, and have slid 34% since the company’s initial public offering last month.

As for the analysts, Deutsche Bank’s Phil Stefano rated Root a hold with a price target of $20.

The company’s product “stands up very well” in terms of sleekness and ease of use, compared to online competitors, he said.

But Root’s underwriting performance “raises questions that the nascent business model unfortunately does not have answers to yet,” Stefano said.

Evercore ISI’s David Motemaden was a bit more positive on shares of Root, with an in-line rating and a price target of $24. 

“It is still early days in Root’s journey, and the benefit of several quarters of execution could prove out that Root’s flywheel is working,” he said, according to Bloomberg.

Truist’s Youssef Squali went further than that, labeling the stock a buy with a $26 price target.

The auto insurance industry represents a $260 billion business, giving Root a “standout topline opportunity,” he said. “Root has a compelling offer of fair pricing based on driver behavior rather than typical underwriting criteria like credit score or demographics.”

Cantor Fitzgerald’s Steven Halper also was bullish, grading Root overweight, with a $28 price target. 

He expects the company will stay in the red for the next few years, but “profitability should improve over time due to robust top-line growth and the impact of renewal premiums,” he wrote.