Porto shares are volatile after Bank of America upgrades its buy recommendation and increases its target price (Image: Adobe Stock/Disclosure – Editing: Giovanna Figueredo)
With an eye on the company's accelerated growth in several segments, Bank of America (BofA) raised its recommendation from neutral to buy for shares of Porto (PSSA3)old Safe Haven.
The bank also revised the insurance company's target price upwards, from R$33 to R$43 — which represents a potential appreciation of 20.1% in relation to the closing price last Thursday (19).
Analysts also see potential for 6% dividend yield (dividend yield).
According to the bank, the 'new' recommendation and target price incorporates “healthier” than expected trends in auto and health insurance, as well as a higher interest rate scenario, the Selic.
This Friday (20), Porto's shares are operating volatile, amid position adjustments on the stock exchange. Around 3:31 pm (Brasília time), PPSA3 was up 0.22%, at R$35.68. Follow in Real Time.
The reasons to buy Porto
For the positive review, BofA analysts evaluated the business segments: automobiles, health, banking and services — considered essential to support growth and ROE (return on equity).
In the auto sector, the bank expects insurance premiums to accelerate, while the loss ratio tends to normalize, remaining below the historical average of approximately 60% over the next two years.
Health insurance premiums are expanding by around 50% year-to-date, with an impact on the insurance broker network in Porto — now 20% above BofA's projection at the beginning of the year.
Meanwhile, banking revenues are growing by about 25% since January as the company has seen growth in its credit card portfolio, “focused on high-quality customers and cross-selling.”
Based on the numbers, the bank's analysts expect double-digit earnings per share (EPS) growth in 2025 and 2026.
Net profit is also expected to grow 14% next year to R$3 billion. For 2026, the estimate is an increase of 12%, to R$3.3 billion.
“While core business profits (automotive, P&C (property and casualty) and life insurance) are expected to remain relatively stable, we expect group net profit to be supported by the other business verticals, which combined are expected to grow by 35%,” Mario Pierry and Antonio Ruette write in a report.