TRUP - BofA turns Neutral on Trupanion after Q1 loss ratio spike stock drops 17%

2023-05-08 10:53:57 ET

Trupanion ( NASDAQ: TRUP ) slid 16.8% on Monday, continuing its decline for the second day in a row after its Q1 results , which prompted a Bank of America downgrade to Neutral from Buy on higher loss ratio and volatile risk/reward balance.

Shares of Trupanion ( TRUP ) ended ~20% lower on Friday after hitting their lowest level in more than three years.

While claims inflation has been a well-known risk to Trupanion's ( TRUP ) performance, analyst Joshua Shanker noted that the pet insurer managed to keep its medical loss ratio at 73% across the last nine months of 2022.

However, loss ratio surged to 77.6% in Q1. "The business' ability to assess pace of loss trend in real time is called into question, and, even if there seems upside to fair value, we do not believe TRUP will find new investor interest until it shows it can move its loss trend toward profitability," said Shanker.

Trupanion ( TRUP ) expects an inflection in H2 2023 as it pushes through already approved mid-teens pricing hikes and files for additional increases.

Price target was slashed to $32 from $72, implying 10.8% potential upside to TRUP's last close.

BofA's stance contrasts bullish sell-side ratings . SA Quant believes TRUP is at high risk of performing badly, given its decelerating momentum and inferior profitability.

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