What happened
The stock market was having a solid rebound on Thursday after a recent slump, with all three major indexes up by 1% or more at 12:30 p.m. ET. However, Lemonade (LMND -0.46%) was a major outperformer, with shares higher by 9% after rising by as much as 11% earlier in the session.
So what
There doesn't seem to be any company-specific news fueling the move, but there are a couple of factors worth pointing out.
Image source: Getty Images.
For one thing, there has been a massive rotation out of many high-growth stocks recently, and Lemonade was one of them. Most other recently beaten-down stocks are getting a lift Thursday, so this move feels like it's mainly part of a broad-based rebound.
It's also important to realize that Lemonade is one of the most heavily shorted stocks in the market, with recent short interest at nearly 33% of the float. That's a lot of betting against Lemonade, and it's certainly possible that after such a long slump in the stock (Lemonade has been more than cut in half since November), we're seeing a bit of short covering. This could explain why although most beaten-down stocks are rallying, Lemonade is one of the best performers on Thursday.
Now what
It's important to keep things in perspective. Even after today's move, Lemonade is more than 80% below its 2021 high, so take today's spike with a big grain of salt. In a couple of weeks, we'll get a look at Lemonade's fourth-quarter results, and investors will have a better idea if Lemonade's stock is cheap, or cheap for a reason.
