Key Points
The company was officially served notice that a regulator’s investigation wouldn’t result in an enforcement action against it.
This encouraged two analysts tracking the stock to publish new, bullish notes on its future.
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Both Globe Life (NYSE: GL) executives and investors wiped their collective brows on Tuesday. The company was formally cleared in a regulatory investigation, and it was the subject of a pair of optimistic analyst updates just afterwards. With these winds at its back, Globe Life’s stock price rose by nearly 7% on the day, crushing the S&P 500 index and its 0.3% slip.
The end of the affair
Globe Life had actually divulged news of the probe’s end last week. Still, the insurer was surely happy to report after market hours Monday that it’s received formal notice that the investigation is concluded. The Department of Justice’s (DoJ) U.S. Attorney’s Office for the Western district of Pennsylvania said that no enforcement action would be taken against the company.
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Image source: Getty Images.
The investigation centered on fraud allegations, raised in a pair of short seller reports, that fraud was being committed at both the company and American Income Life, a subsidiary.
Compounding this win, not one but two analysts tracking Globe Life published new and positive research reports on its stock. Keefe, Bruyette & Woods’ Ryan Krueger raised his price target on the shares, albeit slightly, to $160 per share from his preceding $155. In doing so, he maintained his outperform (buy) recommendation.
TD Cowen’s Andrew Kligerman also weighed in with a positive take, reiterating his buy rating and $182 per share price target.
Focus on the fundamentals
I don’t personally feel that investors should buy into Globe Life purely on the basis of the investigation’s wrap-up. The company has done a decent job of growing both premiums and key fundamentals, and it should be considered on that basis, not on the status of its relationship with top regulators.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
