Lemonade Share Price Forecast August 2021 – Time to Buy LMND?
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Shares of insurance company Lemonade (NYSE: LMND) took quite a tumble on August 5th, closing at $80.90 as of August 6th 19:59 UTC-4. The company recently posted its earnings report for the second quarter, which indicated a fall in revenue year over year of 6%. However, the revenue of $28.2 million is higher than analyst expectations.
Lemonade – Technical Analysis
According to the financial statement released by Lemonade, the company has a market cap of $4.968 billion with total assets worth $1.307 billion. Revenue for 2020 was at $79.10 million, up from $67.3 million earned in 2019. The debt to assets percentage of the company is at 21.41%.
Technical indicators such as oscillators for Lemonade, such as Momentum (10)(30.61) are pointing towards selling. Moving averages such as Exponential Moving Average (10)(88.67), Simple Moving Average (10)(101.42) and Hull Moving Average (9)(86.04) are also pointing towards selling.
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Recent Developments
Lemonade launched proportional reinsurance agreements with several insurers back in the 3rd quarter of 2020. They explained the model in brief in its most recent 10-K filing. While sharing premiums will allow Lemonade to lower capital requirements, it also reduces its reported revenue. This resulted in a situation where Lemonade’s number of customers, in-force premium, the premium per customer, and gross earned premium increased while its second-quarter revenue declines year over year.
Lemonade expects its total revenue to rise 30%-32%, its gross earned premium to increase 80% to 81% and its in-force premium to grow by 78% to 80%. All of these numbers are higher than projections in the first-quarter report in May, prepared by management. The company’s annual dollar retention rate also improved, which is an indication that the company’s ecosystem is expanding.
Should You Buy LMND Shares?
Investors interested in LMND shares should look at certain statistics. For instance, the company’s net losses look ugly in spite of the gross loss ratio declining sequentially from 121%. Adjusted gross margin for the company also expanded sequentially year over year as it moved past the winter storm.
However, these improvements aren’t assisting Lemonade to narrow its adjusted EBITDA losses yet, with the company expected to remain unprofitable for the foreseeable future. It is a company that is trying hard to disrupt the traditional insurance market via a comprehensive AI-powered app that insures customers within 90 seconds. This approach has made it popular among first-time insurers and novices as it bypasses the byzantine process of buying insurance plans.
Investors should also consider that the company is facing similar tech-forward competitors in the market. Additionally, its product ecosystem expansion with new features such as the auto insurance platform could cut margins and spread its resources to the limit. The company will certainly be in a good position to disrupt the insurance market if it gains millions of new customers over the next few years. For instance, Its competitor, Zillow, changed the way people buy and list properties via their unique app. The company also plans to add car insurance to its portfolio in the near term, which will increase its market opportunity by $300 billion.
But it’s too early to predict whether Lemonade can achieve that goal. Thus, it will always remain a speculative stock until it gains more customers and expands beyond the United States. Lastly, the growth metrics of the company are still rising, making it the perfect share for investors with risk appetite.
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