It seems like insurance tech company Lemonade (NYSE:LMND) can't go more than a day or two without its stock jumping or sliding by a double-digit percentage. In fact, that's exactly what happened three days in a row last week.
Well, it happened again today. Lemonade's stock price rose by about 10% by 3 p.m. EST, so it doesn't look like the recent volatility is going away.
Unlike some of the recent moves in the stock, this one doesn't seem to be fueled by any specific news. But it does seem to follow the recent pattern of an overreaction in the stock price, and then a relief rally when investors realize their fears are likely overblown.
Last week, the culprit was the expiration of Lemonade's lock-up period. About two-thirds of the outstanding shares (most held by company insiders) became eligible to sell for the first time, sending the stock lower last Monday. Then, the stock proceeded to rally sharply later in the week as the wave of insider selling that investors had feared didn't happen.
This time, Lemonade simply fell on Monday along with the overall market, but like many high-momentum stocks, the drop was rather sharp. By the end of the day, Lemonade had dropped by about 8%. Now that the market is recovering some of its losses, the stock is rebounding sharply.
The key takeaway is that Lemonade is a rather volatile, high-growth stock, and it doesn't necessarily need any major news. Investors who add the insurance stock to their portfolio should be prepared to deal with these double-digit swings on a regular basis.