Investing

Why Globe Life Stock Soared Today

Gerelyn Terzo

Published: April 17, 2024 8:55 pm

Insurance might seem like a boring sector to bet on, but one company is proving that theory wrong of late. Investors piled into Globe Life (NYSE: GL) today, sending shares soaring by nearly 6% to back above the $60 threshold in a much-needed recovery for the insurance holding company.

Today’s performance should be viewed in context, as it follows a massive sell-off in which the Globe Life stock price was more than halved in a day – from $104 to $49 – last week in response to a short-seller report alleging insurance fraud that eliminated about a decade’s worth of market gains or $5 billion in market cap from the stock.

Now Globe Life, a dividend-paying stock, is at the center of a Department of Justice investigation in which one of the Texas-based company’s subsidiaries is reportedly accused of sexual misconduct and customer abuse.

So why did investors have a sudden change of heart? Shares have been recovering in a possible sign they were oversold after a chain of negative events that even sent a fellow holding company — Warren Buffett’s Berkshire Hathaway — running for the exits on the stock. Or it could reflect the fact that Wall Street analysts haven’t given up on Globe Life stock just yet.

Tangled Web

Last week, Fuzzy Panda Research, a short-seller firm whose founders are anonymous, came out swinging against Globe Life. The short-sellers accuse Globe Life’s management of turning a blind eye to shenanigans that were allegedly taking place at subsidiary American Income Life, which generates 50% of the parent company’s revenue. Fuzzy Panda accuses the company of making millions of dollars from unscrupulous behavior and more closely resembling a multi-level marketing scheme than an insurance company.

Globe Life has clapped back at Fuzzy Panda, claiming that the research report was “wildly misleading, mixing anonymous allegations with recycled points” of contention. While Globe Life has decades of operating history under its belt, Fuzzy Panda has a stellar track record on its side in which stocks on the firm’s shortlist lost more than two-thirds of their market value last year on average, per a Breakout Point analysis.

Either way, the controversy isn’t likely to reach a conclusion anytime soon, with uncertainty in the stock expected to play out for the remainder of this year at least.

Is Globe Life Stock a Buy in 2024?

Despite the controversy surrounding Globe Life, Wall Street analysts are mixed on the stock. Some believe there’s value in it, including Truist, which has a price target of $125 attached to the stock. Truist analysts, whose price target reflects 98% upside potential, also reiterated their hold rating on shares.

But not all analysts are quite so sanguine on Globe Life stock. Take Evercore ISI, which responded to the scandal by slashing its price target on the stock from $125 to $75 with an in-line rating.

As of February, JPMorgan reportedly had an “overweight” rating on Globe Life, writing in a report that the company was “humming along as expected.” Meanwhile, at last check Morgan Stanley’s price target was as high as $133 with a hold rating. Investors are watching and waiting for any changes to those outlooks.

Globe Life is expected to report Q1 earnings on April 22, during which time analysts and investors may find some answers to their burgeoning questions.