Root (NASDAQ:ROOT) stock dropped 2.4% in early Friday trading after JMP downgraded the insurtech to Market Perform following the sector's recent stock rally, with ROOT rising more than 10-fold year to date.

The run-up reflects improvements in underlying profitability, along with a return to solid growth, JMP analyst Matthew J. Carletti said. While he sees the valuation as fair, "we struggle to come up with the desired upside from current levels to continue to support a Market Outperform rating," he wrote in a note to clients.

Specifically, Root (NASDAQ:ROOT) needs "to walk the tightrope of strong loss ratios (which it has done for several quarters now) alongside continued solid growth," Carletti said. In addition, the company's larger peers are likely to pursue growth in coming quarters, making it more difficult for Root to thread the needle, though he still sees it as attainable.

In JMP's insurtech update, Carletti reaffirms Lemonade (LMND) at Market Outperform and lifts its price target to $60 from $40 and reaffirms Hippo's (HIPO) Market Outperform rating while boosting its price target to $35 from $25.

JMP's Market Perform rating contrasts with the SA Quant rating of Strong Buy and the average Wall Street rating of Buy.