Lemonade Inc. Share Forecast November 2021 – Time To Buy LMND?
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Shares of the New York-based insurance company Lemonade Inc. (NYSE: LMND) are in the red today, after closing at $62.86 on 11th November (3:15 GMT-5). As the company reported its financial results for the Q3 FY 2021, the shares of LMND sank as some troubling signs emerged that could further impact the share prices of the company. The results indicate that the share market is not favouring Lemonade’s acquisition of its competitor company Metromile. Stock prices of Lemonade recorded 12% down and Metromile was up by only 3%. So, what does this mean for LMND? Will the company’s bold decision to acquire Metromile for $500 million in an all-stock deal prove to be valuable? Or will Lemonade’s share prices will further plummet? Let’s find out.
Lemonade – Technical Analysis
According to the financial statement of Lemonade Inc, the market cap of the tech powered insurance company is at $3.869B with total assets worth $1.302B. Whereas, the total revenue for the year 2019 was $67.30M and the consecutive year of 2020 was $79.10M.
Moving Averages for LMND such as Exponential Moving Average (10) (66.38), Simple Moving Average (10) (66.91), Exponential Moving Average (20) (66.40) and Simple Moving Average (20) (66.01) are pointing towards selling. Oscillators such as Momentum (10) (2.08) and MACD Level (12, 26) (-0.31) are pointing towards buying.
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Recent Developments
Even though most of Lemonade’s metrics came in higher than the expectation, analysts couldn’t help ignoring the alarming signs that the company has been showing. To begin with, LMND’s management didn’t make any move in raising their in-force annual premium guidance at all. In fact, it lowered the premium guidance to gain adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). This has resulted in EBITDA loss of $185 million.
Next up, Lemonade’s loss ratio has only gotten worse in its Q3 reports which could pose a major red flag for an insurance company. Compared to last year’s gross loss ratio of 72%, this year LMND was at 77%. However, the company emphasizes that introduction of new products will result in curbing the loss ratio.
Alternatively, investors are raising a question for Lemonade’s proposed acquisition of Metromile. Metromile incurred a net loss of 48% in the second quarter which is in fact, even a bigger loss than Lemonade Inc. Moreover, shareholders may have an impression that this could not be a shareholder-friendly decision.
Should You Buy LMND Shares?
Lemonade’s new additions to its insurance services such as life insurance, pet insurance and homeowners insurance accounts for 47% of the company’s business. Additionally, Lemonade launched its Lemonade Car just last week and is already in process of doubling the product line by acquiring Metromile which is a car insurance company. Now, Metromile operates in 49 states across the US, whereas Lemonade Car operates in only one. It is quite possible that the acquisition could spark the business toward the road to recovery and possibly influence the share prices of LMND in upcoming weeks. It is preferred to keep an eye on Lemonade’s gross loss ratio and wait till the acquisition fully holds the market.
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