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Why Lemonade Stock Had a Topsy-Turvy Wednesday

By Eric Volkman – Nov 10, 2021 at 4:42PM

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Investors weighed not one, not two, but three analyst price-target cuts following earnings.

What happened

The stock of Lemonade (LMND 1.88%) was shaken hard by the market on Wednesday. One day after the insurance tech specialist reported its latest quarterly results, several analysts cut their price targets on the stock; as a result, investors were hot and cold during the day, alternately trading the shares higher, then lower.

Finally, Lemonade ended the day down very slightly from Tuesday's level.

So what

Wednesday morning, three analysts tracking Lemonade tweaked their targets. The most drastic of these adjustments came from JMP Securities' Ronald Josey, who lopped off $45, making his new price target $95 per share, Crucially, he's keeping his market outperform (i.e., buy) recommendation.

Man signing a car insurance policy.

Image source: Getty Images.

Meanwhile, fellow analysts Ross Sandler from Barclays and Oppenheimer's Jason Helfstein made more-modest cuts. Sandler reduced his target to $62 per share from $68, and Helfstein went to $85 from $95. Like Josey, both prognosticators are maintaining their recommendations: equalweight (hold) in Sandler's case, and outperform for Helfstein.

Lemonade's third quarter, the results of which were published on Tuesday, certainly provided some cause for concern.

Premiums and revenue were up sharply (particularly the latter, which more than doubled on a year-over-year basis). However, the company again landed deep in the red on the bottom line with a more than $66 million shortfall. Its gross loss ratio climbed, and its just-announced $500 million deal for auto insurer Metromile will strain its the finances.

Now what

Lemonade clearly has some strong bulls in the pen, considering that its stock actually rose at certain points in the day despite the analyst price cuts. The company is clearly striking a chord with customers who appreciate its next-generation insurance offerings, although it remains to be seen how successfully it can integrate auto coverage into its existing business.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lemonade, Inc. The Motley Fool recommends Barclays. The Motley Fool has a disclosure policy.

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