What happened

This video will talk about the recent stock price surge from Lemonade (NYSE:LMND). The stock is up 75% this past month. Surprisingly, there isn't any company-related news behind this month's move. But some might say it has to do with the recent short-squeeze action. Lemonade had been one of the most beaten-down stocks in the market since the start of the year. The stock was down 65% from its highs. A mix of short-seller reports and a negative reaction to Lemonade's first-quarter earnings report sent the stock plummeting. As of today, the stock is still down roughly 40% since its all-time high. 


We've seen quite a bit of short-squeeze action regarding the so-called meme stocks, which are generally correlated to heavily shorted companies. And Lemonade certainly qualifies. As of today, nearly 20% of Lemonade's float is sold short, which is down from 30% since May. So one can assume that much of Lemonade's recent price action could be the result of short-squeeze pressure.

What's next?

Just as with the short squeeze that happened earlier this year, we might see these meme stocks plummet again, and that might hurt a stock like Lemonade, which has been dragged along in this rally. Especially since there has been no news regarding the company that might justify a 75% rise in stock price. Waiting on the sidelines until things calm down might be the best move in the current market. 

Watch the video below for the full insights.

*Stock prices used were the closing prices of June 9, 2021. The video was published on June 10, 2021.

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.