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Why Shares of Lemonade Are Down Today – Motley Fool


What happened

Shares of the insurtech firm Lemonade (NYSE:LMND) traded nearly 3% down as of 11:20 a.m. ET for no obvious reason, other than the continued struggle of financial technology stocks in the broader market.

So what

Lemonade went public last year and wowed investors with its artificial intelligence capabilities that could process applications, make decisions, and pay out insurance claims very quickly. At its high, Lemonade traded at nearly $164 a share. Since then, investors have soured on the stock, with its share price now around $51.

Earnings have not exactly impressed investors, with the company reporting a $171 million loss through the first nine months of the year, significantly higher than 2020. The net loss ratio has also moved higher and now sits at 91% through the first three quarters of the year, compared to 70% a year ago.

However, investors have been excited about Lemonade’s move into the auto insurance market. The company recently announced its plans to acquire the car insurance tech company Metromile (NASDAQ:MILE) in an all-stock deal to boost these efforts.

Cylinders arranged in descending order by height.

Image source: Getty Images.

Now what

Recent turbulence in the market from inflation, the new omicron variant, and what may be ahead for the stock market in 2022 has placed more emphasis on valuation.

Lemonade’s stock likely got a little ahead of itself. While the company still trades at a premium valuation, this is a much better entry point for investors. The company still looks like it’s going to vastly disrupt the sector, so I still like this stock from a long-term perspective.

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.





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