Morgan Stanley upgraded BB Seguridade (BBSE3) from underweight to equal-weight on Friday, following a steep correction in recent months.
The move comes after the insurer’s shares fell 25% from their peak in May and are down 10% year to date.
At 10:15 a.m. in São Paulo, shares rose 1.31% to R$33.21.
The bank also increased its target price, from R$33 to R$35.
That indicates an 8% upside, which Morgan Stanley termed as restricted in comparison to peers such as Caixa Seguridade (CXSE3), which analysts see as having a 36% potential gain.
Relative underperformance turns valuation attractive
According to the report, BB Seguridade’s stock has underperformed not only its sector rivals but also the overall market.
In dollar terms, the shares have risen only 6% this year, trailing the MSCI Brazil Index’s 34% gain.
The weakening has pushed values to historic lows. Based on downwardly revised projections, the BBSE3 now trades at 7.1 times estimated 2026 earnings.
Morgan Stanley said that much of the predicted earnings weakness has already been priced in, prompting its adjustment to a neutral stance rather than a sell recommendation.
Muted growth outlook keeps rating capped at neutral
Despite the boost, analysts did not go as far as to declare the stock overweight.
They stated that they do not expect a major uptick in profit growth before 2027.
Earnings per share (EPS) predictions were reduced to R$4.56 in 2026, down from R$4.82, but the 2027 expectation was slightly raised to R$4.81 from R$4.69.
Earlier concerns confirmed
The revised forecasts reinforce Morgan Stanley’s long-standing view that BB Seguridade’s earnings growth will trail sector peers.
Earlier this year, the bank argued that much of the insurer’s value was already priced in, reflecting higher interest rates and the potential renewal of its distribution contract with Banco do Brasil, leaving limited upside.
Since then, consensus estimates have been cut, while company executives recently flagged concerns at an investor conference in London.
The developments underline Morgan Stanley’s cautious stance.
Key risks materialising
The report also flagged emerging risks in BB Seguridade’s rural and pension segments.
Climate variability, commodity price volatility, and reliance on government support for agribusiness were cited as structural challenges.
Some strains are already evident, with Banco do Brasil recently adjusting rural credit conditions and federal subsidies for rural insurance cut by 50%, both of which are expected to weigh on premium growth.
Shares of BB Seguridade rose 1.25% at the open on Friday to R$33.19 and extended modest gains later in the session.
The rebound suggests investors are taking the upgrade as a reprieve, though Morgan Stanley maintained a cautious stance, noting the insurer may be less overvalued than before, but its growth prospects continue to lag peers.
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