Is Lemonade a buy?

It’s time to breakdown a newer name. Here is the breakdown on $LMND, otherwise known as Lemonade.


Current Price: $183.05

52/Wk High: $188.30

52/Wk Low: $44.11


Market Cap: $10.4 Billion


Read below for the breakdown!


Lemonade is a major provider of insurance for all types of use cases. From homeowners insurance to pet insurance the company’s offerings are vast and their online platform makes the insurance process easier than ever.


Since the inception of the stock, the name has been on fire, rallying 176.56% in just the last three months alone.


In recent news, Lemonade made use of the boom in their stock price, announcing an offering of common stock that totals 3 million shares. While offerings are often seen as negative, new traders are starting to see this as a positive, as it benefits the company itself.


Shifting into the numbers, Lemonade beat Q3 2020 earnings expectations with an EPS of $-0.57, much better than the EPS consensus estimate of $-0.64. Not only did Lemonade beat EPS expectations but saw plenty of growth under the hood.


Lemonade went on to report that In Force Premium or IFP improved by a solid 99% to $188.9 million throughout the third quarter and total customers grew by 67% year over year to a whopping 941,313 total customers.


Furthermore, management reported that the premium per customer increased by 19% throughout Q3 to a solid $201. Not only that but gross earned premium laned at $42.9 million, representing a 104% increase year over year.


As for revenues, Q3 2020 revenues totaled $17.8 million, which was lower than the previous quarter but management noted that a YoY and QoQ comparison is not viable because “proportional reinsurance agreements went into effect at the beginning of the quarter,” the company said.


Gross profit improved as well, with gross profit improving by 83%, totaling $7.3 million. Adjusted gross profit landed at $9.3 million, representing 133% growth year over year.


Rounding out Q3 2020, Lemonade reported operating expenses of $41.6 million (Up 11%) and a net loss of $30.9 million. On the flip side, adjusted EBITDA loss improved by 9%, landing at $27.6 million.


Lemonade management delivered guidance as well. Below are the company’s expectations for Q4 2020.


  • Gross Earned Premium of $46 to $48 million.

  • Revenues of $18 to $19 million

  • IFP between $200 to $205 million


Below are Lemonades FY 2020 expectations.


  • Gross Earned Premium of $154 to $157 million.

  • Revenues of $91 to $93 million

  • Adjusted EBITDA loss of $-103 million to $-100 million.


Shifting into the balance sheet the numbers are solid.


Total Debt: None


Total Liabilities: $263 million


Total Assets: $832 million


Cash & Equivalents: $575 million


On a valuation basis Lemonade is expensive, currently trading at a price to book ratio of 18.22x, well above moderate levels.


Given the numbers, the analysts are bearish, with a mean price target of $72.25/share, representing a -58.34% downside.


It is important to note that the high price target is $105.00/share, representing a -39.46% downside, while the low price target is $56.00/share, representing a -67.71% downside.


The big money is much less involved as well, with just 29.25% of Lemonade being owned by institutions. Top holders include SoftBank Group, Baillie Gifford & Company, and AXA Investment Managers UK.


On a technical basis, Lemonade is bullish. According to the six-month charts, the MACD is moving to the upside with significant momentum within a range of 21.08 down to 15.88.


The six-month charts are also indicating an RSI of 71.93 and CCI of 201.51, both of which are on the high end.


In short, Lemonade is a solid long-term player given future expectations but the stock has simply run too far, too fast, in the short term, and waiting for a healthy correction is favorable.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.