Investing.com -- Allstate Corp. (NYSE:ALL) has been elevated to a Top Pick at Morgan Stanley (NYSE:MS) as the investment bank's analysts forecast growth in the company's auto policies and market share for 2025.
Morgan Stanley raised its price target on Allstate from $220 to $228 in the note Thursday, citing an improving competitive environment, enhanced retention, and strategic ad spending as key drivers of growth.
According to Morgan Stanley, Allstate's auto Policy-in-Force (PIF) will expand in 2025, supported by a "deceleration in rate filings" that are anticipated to improve retention.
The bank projects a YoY Auto PIF growth of approximately 3.8% for 2025 and 2% for 2026. The note highlights Allstate's strategic emphasis on advertising, which Morgan Stanley believes will fuel an increase in new policy sign-ups.
Analysts state that Allstate's ad spending is set to grow 172% in 2024 and another 22% in 2025 before tapering by 8% in 2026.
The increase is expected to "support new policies in 4Q24 and 2025," potentially leading to the addition of 7 million new policies in 2024 and 7.4 million in 2025.
Morgan Stanley also highlighted that the "renewal rate will increase due to pricing deceleration," with management estimating that a one-point increase in renewal rate could translate to an additional 350,000 auto policies.
The bank expects retention to improve by 1.5 points in 2025, supporting an added 591,000 auto policies that year and 602,000 in 2026.
Morgan Stanley concludes that Allstate is positioned for "efficient growth opportunities," bolstered by a more stable pricing environment, strong ad effectiveness, and improved retention strategies, making it their top choice for 2025.