Jackson Financial Inc. (NYSE: JXN) saw its shares climb 8.3% in premarket trading following a rating change from Jefferies. The investment bank moved the stock from Hold to Buy and increased its price target to $140 from $120.
Jefferies analyst Suneet Kamath acknowledged that the upgrade reverses an earlier decision to downgrade the stock to Hold in early 2024, saying that the prior downgrade "was not the right call." Kamath pointed to several developments since that downgrade in support of the revised view.
One factor cited was the broad advance in the S&P 500, which Jefferies noted has climbed by 58% cumulatively. Jefferies emphasized that Jackson Financial's earnings profile is among the firm's most sensitive to movements in equity markets, making the index's substantial gain a favorable tailwind for the company.
Another element behind Jefferies' upgraded stance was a $500 million capital infusion from TPG earlier in the year. That capital now sits within the capital structure of Brooke Re, and Jefferies said this development alleviates near-term concerns about Brooke Re's capitalization.
The analyst also pointed to the company's annuity sales trajectory. Jefferies expects Jackson Financial's annuity sales growth to remain above peer levels for the coming quarters, driven in part by elevated sales in spread-based annuities associated with the company's relationship with TPG. Jefferies' note highlights that over the past six quarters Jackson Financial's sales growth has outpaced both the broader industry and the firm's coverage group.
Jefferies' original downgrade had been influenced by worries that the Brooke Re solution would diminish transparency around risk-based capital, a metric the analyst considered one of the company's most important key performance indicators. That concern was a material component of the earlier Hold rating.
The change in Jefferies' view and the ensuing market reaction underline the sensitivity of Jackson Financial's valuation to equity market performance, capital solutions related to Brooke Re, and the company's annuity sales momentum. Market participants reacted swiftly to the upgrade and higher target, reflected in the premarket price move.
Market data note: The premarket price move reported reflects trading activity ahead of the regular session and follows Jefferies' published research on the company.