Lemonade Inc.

Lemonade Inc. (NYSE -LMND) is a firm that also offers property and liability insurance. Tenants and homeowners in the United States can purchase the company's products, as well as goods and insurance coverage in Germany and the Netherlands, and tenants' insurance in France.

Key Highlights

• Weak Financials: Lemonade Inc.’s net earnings loss increased from USD 122.3 million in FY20 to USD 241.3 million in FY21.
• Lemonade Inc. Crypto Climate Coalition: On March 22, 2022, The Lemonade Foundation, an NPO established by Lemonade Inc., announced the launch of a division to give farmers and livestock keepers in developing markets at-cost instantaneous weather insurance.
• Poor operational and financial ratios compared to competitors: Lemonade Inc.'s gross loss ratio for FY21 was 90%, implying that for every dollar of the premium received, $0.90 in claims were filed. Allstate Corporation, on the other hand, has a gross loss ratio of 72 percent. Lemonade Inc. has recognized the need to considerably improve to compete in the business and has established a long-term gross loss ratio objective of 75%.

When compared to Allstate and Progressive Corporation, which have price-to-sales ratios of 0.842 and 1.459, respectively, LMND has a very high price-to-sales ratio of 11.21.

• Q1 Financial results announcement: Lemonade Inc. announced on April 19, 2022, that it would reveal its first-quarter 2022 financial results after market close on Monday, May 9, 2022. Simultaneously, on the following day, May 10, 2022, a conference call will be conducted to address the results.
• Technical analysis: Current stock price at 8:00 am as of 27 April 2022 is USD 20.02. As can be seen from the chart that the price took strong support from Fibonacci 1.68 level around USD 27.70 and then broke down making an all-time low of USD 16.70. At March-end, the price reached a level of USD 30, but short-term (50-day) SMA and 1.68 Fibonacci level acted as strong resistance pushing the price again lower. Current expectations are of price to make a double bottom and simultaneously form bullish divergence on the weekly time frame.

1-year Technical Price Chart (as of April 27, 2022, 08:00 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Conclusion

 Lemonade Inc. is an AI-based insurance lending project backed by strong institutional investors such as JP Morgan Investment Management, BlackRock, and Morgan Stanley& Co. LLC to name a few, with high expectations of disrupting the sector. Lemonade Inc. has an expected Q1 result release on 9^th May 2022, with expectations of much-improved financials compared to last year.

We recommend a "Watch" rating on the stock at the current price of USD 20.02 as of April 27, 2022, at 08:00 AM PDT, with a further evaluation when the Q1 financial results will be announced.

Technical analysis summary

* Current price as of April 27, 2022, at 08:00 AM PDT

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.