Although the market seemingly can’t get enough of artificial intelligence (AI) – thanks largely to the ChatGPT phenomenon – the advanced protocol represents both opportunity and a crapshoot. However, that’s where insurance giant Progressive (NYSE:PGR) may end up saving the day. Combining a tried-and-true business with AI technologies, investors get the best of both worlds — relevance and reliability. Therefore, I am bullish on PGR stock.
Without question, AI represents a groundbreaking development, both for facilitating various conveniences and potentially increasing productivity. At the same time, as with any nascent industry, investors must wager on which enterprises will ultimately distinguish themselves. Of course, that’s a tall order because anything can happen, particularly in this economy.
However, Progressive represents a giant in the insurance ecosystem. If its AI protocols don’t pan out, PGR stock will probably be just fine. Still, there’s a good chance Progressive will ultimately rank among the AI winners.
Primarily, the company’s using its advanced tech in sensible ways. For instance, through its Snapshot program, Progressive deploys predictive analytics to adjust customer premiums based on their driving behaviors. Better yet, it’s all data, thus helping to remove human flaws such as biases or outright discriminatory tactics.
As well, Progressive depends heavily on its Flo Chatbot, a customer service chatbot that assumes the identity of its namesake corporate mascot. Here, Flo Chatbot can address customers’ high-volume, single-purpose requests, such as policy purchasing or claim filing.
If that isn’t enough, investors can always depend on the meat of Progressive’s business.
Here’s What Can Help Lift PGR Stock Higher
Indeed, even without the benefit of the AI components, PGR stock would likely drive higher from here on out. Much of the optimism centers on cynical catalysts.
Perhaps most pressingly, circumstances in society dictate a closer look at financial protection. Here, the COVID-19 crisis offered the best organic marketing opportunity. Suddenly, Americans realized that far-off exotic problems could quickly devolve into domestic troubles because of globalization. Just the harsh reality that anything can – and might – happen may be enough for households to sober up and protect themselves. That’s broadly positive for PGR stock.
More specifically, road safety has become a major concern since the gradual normalization of the pandemic. Sadly, road violence has also escalated dramatically, meaning that the chances of encountering a traffic incident pings higher today. With Progressive owning the largest market share for domestic auto insurance, roadway volatility should cynically lift PGR stock.
However, the probability of financial loss doesn’t obviously just exist in the automotive context. After a nationwide decline in property crime rates between 2019 and 2020, this stat jumped exponentially during the first quarter of 2022. Again, it just pays for households to cover up and protect themselves. Hopefully, they won’t need to file claims. Unfortunately, however, heightened crimes translate to a greater probability of victimhood. Here again, PGR stock may benefit.
Patience is Required
Although the narrative for PGR stock appears compelling, it’s not a perfect investment. Mainly, those that venture into Progressive will need some patience.
First and foremost, PGR stock appears overvalued at the present juncture. For instance, the market prices Progressive at a forward earnings multiple of 22.4 (or 22.4 times estimated earnings per share for the year). In terms of value, this ranks worse than 87.3% of its peers.
Also, PGR trades at a trailing one-year sales multiple of 1.7, which is a higher valuation than 71.1% of the industry.
That said, the insurance giant features a three-year revenue growth rate of 8.3%. Though not wildly impressive, this stat outpaces 58.8% of the competition. Also, it’s worth pointing out that over the past decade, every single year has been profitable for the company.
Therefore, it’s not so much about the individual fiscal metrics that investors should pay attention to. Rather, with PGR stock, it’s all about resilience against various economic cycles.
Is PGR Stock a Buy, According to Analysts?
Turning to Wall Street, PGR stock has a Hold consensus rating based on six Buys, four Holds, and three Sell ratings. The average PGR stock price target is $144.54, implying 1.2% upside potential.
Conclusion: PGR Can Go Old School and New School
Though AI is all the rage, too many companies lack practical direction with their innovations. In contrast, Progressive utilizes AI to improve its core business and its customer experience. Combined with emerging relevancies and a proven track record, PGR stock represents a viable play on the much-hyped tech.
