Arch Capital downgrades stock to buy, raises first-quarter profit target

On Tuesday, CFRA adjusted its stance Gongfeng Capital Group Ltd. (NASDAQ: ), downgraded the stock to a Buy rating from Strong Buy while raising the price target to $107 from $105.

The company's new price target reflects a valuation of Arch Capital stock at 11.8 times CFRA's 2025 operating earnings per share (EPS) forecast of $9.10 and 12.2 times 2024 EPS estimates, which it raised today by $0.11 to 8.76 Dollar.

The revision came after Arch Capital reported first-quarter operating profit of $2.45 per share, beating CFRA's estimate of $2.26 and the consensus estimate of $2.09. This performance was attributed to a 19% increase in premiums earned and a significant 24% increase in written premiums in the first quarter. During this morning's earnings call, management emphasized the company's proactive approach in dealing with the current tough market conditions.

In addition, Arch Capital's underwriting performance improved, with its first-quarter combined ratio improving to 78.8% from 80.6% previously. The improvement came despite the company being affected by the Baltimore Bridge collapse, an event that CFRA deemed not material to the company's financial prospects.

CFRA expects Arch Capital's pricing and demand to continue to be strong, with operating income expected to grow by more than 20% in 2024 and 15-20% in 2025. industry.

Despite the downgrade, CFRA remains very positive on the stock, which has surged more than 25% since the beginning of the year.

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Investment Professional Insights

Following CFRA's recent analysis of Arch Capital Group Ltd. (NASDAQ: ACGL ), InvestingPro data provides more context on the insurer's financial health and market position. Arch Capital's market capitalization is as high as US$34.96 billion, reflecting its important position in the industry.

The company's current P/E ratio and adjusted P/E ratio for the trailing 12 months through Q1 2024 are hovering near the lows of 7.19 and 7.27, respectively, indicating that the stock has a low P/E ratio compared to historical earnings. .

InvestingPro Tips also highlights that Arch Capital is a well-known player in the insurance industry with a good track record, having turned a profit over the past 12 months. It's worth noting that Arch Capital doesn't pay dividends, which may be a consideration for income-focused investors. Additionally, while net profit is expected to decline this year, analysts predict the company will remain profitable, and seven analysts have upgraded profits for the period ahead.

For those considering investing in Arch Capital, it might be a good time to know that the company is trading close to its 52-week high (its price is 98.43% of that peak). With analysts putting its fair value at $109 and InvestingPro's fair value estimate at $89.29, potential investors have a number of views to consider.

For more insights on Arch Capital and other InvestingPro tips, visit and use the coupon code PRONEWS24 Annual or biennial Pro and Pro+ subscriptions receive an additional 10% discount. Here on InvestingPro are six more tips to guide your investment decisions.

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