Deutsche Bank Upgrades Allstate (ALL) to Buy

Deutsche Bank upgraded Allstate (NYSE: ALL) from Hold to Buy with a price target of $70. Analyst Joshua Shanker thinks a recent sell-off in the stock was an overreaction to its Q2 earnings miss.

"Shares of Allstate fell 10% following a 2Q15 earnings miss in which the company reported an increase in auto-accident frequency, something which has not been corroborated by competitor results. We believe this is an overreaction as earnings power at Allstate is still comfortably within the $5-6 range. As a P&C insurer, Allstate's earnings generated off high-frequency/low-severity risk tend to be more predictable than most. Even with the higher auto claims frequency, the company can deliver an accident-year ex-catastrophe combined ratio of 89%. With a 12-month total return near 15%, we comfortably recommend buying shares of Allstate,' said Shanker.

"Either: A) Allstate has spotted a near and concerning industry trend early. The industry can be expected to raise prices to combat it with Allstate being ahead of the curve. B) Allstate is mistaken and its perception of increased frequency is wrong. Losses should then revert to pre-frequency trend levels shortly, with Allstate reporting higher earnings. C) The problem is unique to Allstate, and the company is stuck at an 88.5-89.0% accident-year combined ratio excluding catastrophes. This is the base case contained in our numbers, which lead us to conclude that there is upside at today’s stock price," added the analyst.

For an analyst ratings summary and ratings history on Allstate click here. For more ratings news on Allstate click here.

Shares of Allstate closed at $62.54 yesterday.

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