What happened
Operating at the intersection of two out-of-favor sectors -- tech and finance -- Lemonade (LMND 8.23%) was not a hit with investors on Wednesday. They traded the next-generation insurer's stock down by almost 4.5%, which represented a steeper fall than the S&P 500 index's 1.6%. That gloomy sentiment was exacerbated by an analyst's price-target cut that morning.
So what
That person was Piper Sandler's (PIPR 2.16%) Arvind Ramnani, who shaved $1 off his estimation for Lemonade's value. He now feels the stock is worth $19 per share, and while cutting the price target, he maintained his neutral recommendation.
Ramnani made his move because of inflation. Although the latest statistics indicate that this is being tamed somewhat, the analyst wrote that it has worsened Lemonade's loss ratio of late. He added that 2023 should represent a transitional year for the insurer as it drives toward profitability and ramps up the cross-selling of its products.
Yet the analyst sees silver clouds poking out in the darkness. He wrote that Lemonade has built its business to the point where it now has the "broadest product offering" among its rivals.
Now what
A struggling stock can often take an outsized hit even on slightly negative news, so the market's reaction to Ramnani's $1 price-target cut on Lemonade isn't that shocking. Perhaps bulls should stay the course, though, as their ambitious company has been very assertive in expanding its slate of offerings to establish more revenue streams that will -- hopefully -- turn it profitable before long.
