Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 31 Dec, 24 | ERIE | Buy | USD 411.38 | USD 434.0 | USD 461.31 | 61 days | 12.1% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Erie Indemnity Company operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. It provides issuance and renewal services; sales related services, including agent compensation, and sales and advertising support services; underwriting services comprise underwriting and policy processing; and other services consist of customer services and administrative support services, as well as information technology services. The company was incorporated in 1925 and is based in Erie, Pennsylvania.
Substantial Increase in Investment Income: Investment income before taxes in the first nine months of 2024 grew by $29.3 million (152.6%), from $19.2 million in 2023 to $48.5 million. Net investment income alone increased from $30.4 million in 2023 to $49.2 million, a rise of $18.8 million (61.8%)
Significant Growth in Net Income: Erie Indemnity's net income for the third quarter of 2024 increased by $28.8 million (22.0%) compared to Q3 2023, rising from $131.0 million to $159.8 million. For the first nine months of 2024, net income rose by $113.2 million (33.8%), from $335.1 million in 2023 to $448.3 million in 2024
Decline in Other Income: Other income decreased in both Q3 and year-to-date comparisons. For Q3 2024, other income dropped by $1.8 million (60%), from $3.0 million in Q3 2023 to $1.2 million. Over the first nine months of 2024, other income fell by $1.8 million (18.4%), from $9.6 million in 2023 to $7.9 million. This decline reflects a potential area of weakness in diversifying income streams
Rising Operational Costs: Non-commission expenses increased significantly in both the quarter and year-to-date comparisons. In Q3 2024, these costs rose by $23.3 million (15.7%), and for the first nine months, they increased by $41.7 million (12.1%). These cost hikes include personnel, IT, and sales expenses, which could put pressure on margins if not managed effectively
Limited Partnership Variability, Dependence on Realized Gains, Impairment Losses, Dependence on Realized Gains, etc.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 411.38 | 357.9 | 434.0 | 461.31 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Technical Commentary:
The price chart for Erie Indemnity displays a downward correction following a peak in late September, with the current price below the 50-day (blue) and 21-day (yellow) moving averages, indicating bearish sentiment. The RSI at 42.91 suggests neutral to slightly oversold conditions, implying potential consolidation or a minor bounce. Volume activity appears subdued, reflecting limited conviction in recent price movements. A break above the 21-day moving average could signal a reversal, while sustained trading below the 400 level might indicate further downside risk.
Considering recent key business, financial updates, current trading levels, key business risks, and technical indicators analysis, a ‘Buy’ recommendation has been given on the Erie Indemnity Company (NASDAQ: ERIE) at the closing price of USD 411.38, as on December 30, 2024.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Financial Services Industry: Insurance Brokers
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | |
|---|---|---|---|---|---|---|---|---|
| ERIE Erie Indemnity Company |
-5.15 1.23% | 413.90 | 35.58 | - | 5.40 | 10.89 | 5.52 | |
| MMC Marsh & McLennan Companies Inc |
0.12 0.05% | 244.15 | 27.11 | 21.60 | 4.12 | 8.01 | 4.69 | 17.72 |
| AON Aon PLC |
0.04 0.01% | 399.13 | 30.99 | 21.14 | 5.23 | 12.74 | 6.45 | 21.84 |
| AJG Arthur J Gallagher & Co |
-1.63 0.47% | 343.61 | 54.05 | 25.71 | 5.84 | 5.26 | 6.26 | 27.42 |
| WTW Willis Towers Watson PLC |
1.67 0.49% | 339.62 | 25.57 | 16.03 | 2.81 | 2.80 | 3.28 | 15.43 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is December 30, 2024. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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