Lemonade Share Price Forecast March 2022 – Time to Buy LMND?
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Shares of insurance company Lemonade (NYSE: LMND) are in the green today, after closing at $21.74 as of March 16th (19:59 EST). Lemonade shares have gone through tough times in the last few quarters as a result of potential interest rate hikes and high inflation compounding the fallout from disappointing company performance. As a result, Lemonade shares have declined by 85%.
Lemonade – Technical Analysis
The financial statement from Lemonade indicates a market cap of $1.341 billion with total assets worth $1.341 billion. Revenue for 2020 was at $83.50 million with a profit margin of -288.98% compared to $79.10 million.
Oscillators such as Relative Strength Index (14)(44.18), Stochastic %K (14, 3, 3)(27.92), Commodity Channel Index (20)(−41.69), Average Directional Index (14)(31.44) and Awesome Oscillator(−6.38) are neutral. Moving averages such as Exponential Moving Average (20)(22.51), Simple Moving Average (20)(22.57), Exponential Moving Average (30)(24.60), Simple Moving Average (30)(24.95) and Exponential Moving Average (50)(28.91) are indicating a sell action.
Recent Developments
Lemonade is an insurance company that uses AI to make its business more customer-friendly and efficient. It eliminates paperwork and agents, allowing consumers to interact with intelligent chatbots to purchase insurance and file claims, which keeps Lemonade’s payroll expenses low. Founded by Daniel Schreiber (former president of Powermat Technologies), Shai Wininger (co-founder of Fiverr) and Ty Sagalow, Lemonade became public via an IPO in 2020. The company won a trademark dispute with T-Mobile over the use of the colour pink..
The company’s expenses for customer acquisition is ten times lower than a traditional insurance company. Legacy systems thus cannot match Lemonade’s digital platform which can capture a volume and variety of data.
Lemonade can quantify risk more accurately as it collects about 100 times more data points per customer. This makes its loss ratio less than the industry average. Lemonade recorded a loss ratio of 90% last year, which compares poorly to the industry average of approximately 70% through the first half of 2021. This metric was at 71% in 2020. Management blamed the recent growth in net losses on newer product offerings — like homeowners and pet insurance — which have a higher loss ratio than the company’s more mature renters insurance business.
Should You Buy LMND Shares?
As losses in both homeowner and pet insurance are decreasing, management expects all lines of business to eventually achieve a loss ratio below 75%, which is encouraging for investors. The company reached 1.4 million customers in 2021 which is an increase of 43% from the previous year. Customers spent 25% more on average. This was due to more people adding additional policies (e.g., pet insurance) or graduating to more expensive coverage.
Lemonade has launched an auto insurance product recently, which could be a significant catalyst. It will bring Lemonade’s addressable market to over $400 billion in the U.S. alone. There is also a massive cross-selling opportunity for Lemonade as its current clientele already spends $1 billion on auto insurance each year.
The company has announced plans to acquire AI-powered car insurance provider Metromile for $500 million in stock.
Lemonade shares currently have a price-to-book ratio of 1.1, making the company cheaper than rivals like Allstate and Progressive, which trade at 1.5 times book and 3.5 times respectively. However, if the company can win customers and grow its top line while bringing its loss ratio down, it can be a very good investment for years to come. Thus, investors can look to add LMND shares right now.
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