Progressive Stock Dips After Morgan Stanley Downgrade

Analysts were already leaning bearish coming into today

Deputy Editor
Jun 7, 2021 at 10:43 AM
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The shares of Progressive Corporation (NYSE:PGR) are down 4% to trade at $96.34 at last check, after Morgan Stanley downgraded the stock to "underweight," with a price-target cut to $85 from $90. The firm noted that increased car travel amid economic reopening will have a negative affect on the stock, with additional catastrophe risk from the company's increasing mix of homeowners' business. 

Today's pullback appears to have been contained by support at the $96 level, as well as the stock's 80-day moving average. PGR is also facing off with its year-to-date breakeven level, though its still up 17.6% year-over-year. 

Analysts were already leaning bearish on Progressive stock coming into today, with eight of the 13 analysts in coverage at a "hold" or worse rating, and five a "buy" or better. Meanwhile, short interest has been building -- up 20% during the last two reporting periods.

Despite calls outnumbering puts on an absolute basis, the PGR's 50-day put/call volume ratio of 0.84 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is in the elevated 92nd percentile of its annual range. This suggests a very healthy appetite for long puts of late.

These options are attractively priced at the moment, per the stock's Schaeffer's Volatility Index (SVI) of 20%, which stands higher than just 5% of all other readings in its annual range. This implies that options players are pricing in relatively low volatility expectations. 


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