On one hand, Lemonade (NYSE:LMND) is a truly disruptive insurance company with a big market opportunity. On the other hand, it is a very expensive company with a lot to prove. In this Fool Live video clip, recorded on July 9, Fool.com contributors Matt Frankel, CFP, and Brian Withers, along with Chief Growth Officer Anand Chokkavelu discuss their thoughts on Lemonade's future, and why they didn't quite agree on where it should go in a recent episode of The Rank.
Anand Chokkavelu: And then the other one with the highest delta is Lemonade, where Matt has it at No. 5, I have it at 8, Brian has it at 14.
Brian Withers: I think this is totally what I talked about. It's just a risk-adjusted return. You look at Lemonade, I love Lemonade. Its financials look like crap. [laughs] It's burning cash, it doesn't have great cash flow yet, which is amazing to me for a subscription business, and it still isn't even registered in more than half of the states for home insurance. From proving yourself, I think Matt and I both love Lemonade, and I think we both see the long-term possibility of this, but there still is a bunch I think that this company has to prove.
Matt Frankel: Yeah, there are some unanswered questions, and I think our thoughts on Lemonade are a lot closer than that ranking makes it seem. I think the car insurance thing is going to be a lot bigger than the market expects. That's what I'm watching. If in one year, the car insurance thing is not panning out, I might rethink that position because I'm not interested in owning a multibillion-dollar renters' insurance company. That's not a big market. They're going to have to prove that they can translate their success to other types of insurance. If they can do that, this is a 10X potential stock. But if they can't, like you said, their finances look terrible right now. The winter storm knocked their loss ratio into, I think, 130% or something.
Withers: 50%. It went from 70% to 120%.