It was not a good day for Lemonade (LMND) today, as shares plunged nearly 20% in the closing minutes of Wednesday’s trading session. The insurance operation found itself facing another terrible earnings report, and that was more than the investors could take.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
In-force premiums—one of the best measures of overall business size—were up only 22% for the quarter, hitting $839 million total. That also represented a 14% increase in customers overall, and an 8% increase in premiums to those customers. Further, Lemonade posted $122 million in revenue, an increase of 16.6%, though this proved to be merely satisfactory against analyst projections of $121.8 million.
The gross loss ratio also slipped, as its ratio of claims paid to money received fell from 94% to 79% (the lower, the better). But still, profitability proved elusive. Losses declined—going from $52.7 million to $43 million—but losses continued overall, and that meant little good for Lemonade.
Does the Long-Term Look Better?
These numbers don’t exactly offer a lot of hope, but some are suggesting that Lemonade’s future is actually brighter than the numbers suggest. The revenue guidance for the third quarter didn’t exactly help either, but the real saving grace for the company was its in-force premium growth rate. That was undeniably up this quarter, and reports note that there likely won’t be any slowdown in rates for the third quarter either.
Just to top it off, there is another plan in the works, as the company’s current CEO, Dan Schreiber, announced plans to reduce “cat volatility” in the operation. If that sounds insane to you, an explanation is in order: essentially, Schreiber wants to focus on growing product lines that have nothing to do with cats. This includes pet and renter’s insurance, which are fairly heavily cat-focused. It turns out that insurance products with a cat connection tend to be more volatile.
Is Lemonade Stock a Buy or Sell?
Turning to Wall Street, analysts have a Hold consensus rating on LMND stock based on one Buy, one Hold, and two Sells assigned in the past three months, as indicated by the graphic below. After a 19.56% loss in its share price over the past year, the average LMND price target of $22.25 per share implies 23.41% upside potential.
