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Why Lemonade Stock Gained 38% in November

By Jeremy Bowman - Dec 4, 2020 at 5:58PM

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The insurtech company continues to expand into new growth markets.

What happened

Shares of Lemonade ( LMND -8.90% ) were climbing last month after the "insurtech" company delivered a better-than-expected earnings report and got some positive notes from analysts. It was a volatile month as the chart below shows, but the recent IPO finished November up 38%, according to data from S&P Global Market Intelligence.

LMND Chart

LMND data by YCharts

So what

Piper Sandler issued an overweight rating on Lemonade to kick off the month, calling it a disruptive insurance provider with a digital and tech-forward competitive advantage, which helped fuel its rally in the first week of the month.

A cartoon of a dragon breathing fire on a city

Image source: Lemonade.

Lemonade shares then pulled back after its third-quarter earnings report came out even as it beat estimates. In force premiums, its key metric representing annualized premium collections, rose 99% to $188.9 million, and revenue came in at $17.8 million, ahead of estimates at $14.7 million. Customer count increased 67% to 941,000. 

On the bottom line, it finished with an adjusted loss per share of $0.57, ahead of estimates at $0.64. The day after the earnings report, the post-IPO lockup period expired, and the stock slipped again on high volume as insiders got an opportunity to sell their shares. Lemonade rebounded in the second half of the month, riding a broader trend in growth stocks and amid optimism about a coronavirus vaccine.

Now what

Lemonade shares have surged so far in December though there's been no news out on the stock. Investors may be turning bullish on the stock as it plans to test a life insurance product by February, tapping into a $800 billion market, and it's also planning to enter France, showing the company is ripe for expansion into new geographies and lines of insurance.

The stock is certainly expensive, now trading at a price-to-sales ratio of 40, but this company has the potential to disrupt the massive insurance sector and a growth rate that could lead to multi-bagging returns.

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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Stocks Mentioned

Lemonade, Inc. Stock Quote
Lemonade, Inc.
$45.05 (-8.90%) $-4.40
Piper Sandler Companies Stock Quote
Piper Sandler Companies
$163.39 (-1.42%) $-2.36

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