What happened
Shares of Lemonade (LMND 0.83%) are soaring this week following the publication of the company's first-quarter earnings results. The tech-driven insurance company's stock was up roughly 37.7% from the previous week's market close as of 11:30 a.m. ET, according to data from S&P Global Market Intelligence.
Lemonade published its Q1 results after the market closed on May 3 and held a conference call the following day. Performance for the period came in significantly ahead of the market's expectations. The company posted a loss per share of $0.95 on revenue of $95.2 million, while the average analyst estimate had called for a per-share loss of $1.13 on revenue of $88.2 million.
So what
Lemonade reported strong results across its key performance metrics in Q1. The company's in-force-premium metric, which tracks active insurance policies, rose 56% year over year to reach $653 million, and its gross loss ratio narrowed to 87% from 89% in last year's fourth quarter. Spurred by these results, Lemonade's revenue rose 115% year over year, and its net loss declined to $66 million.
The market is likely also pleased with the company's focus on artificial intelligence at a time when interest in AI is absolutely exploding. Lemonade stated in its letter to shareholders that the company had been built around the technology and that it had made big bets on chat interfaces, bots, and other AI tools.
Now what
In addition to strong Q1 results, Lemonade also issued encouraging forward guidance. For the second quarter, management expects sales to come in between $96 million and $98 million, with the target coming in well ahead of the average analyst estimate's call for sales of $90.9 million. For the full-year period, Lemonade is guiding for revenue between $392 million and $396 million, also topping the average analyst estimate's call for sales of $381.2 million.
Following the explosive gains over the last week, Lemonade stock is now up roughly 8% year to date. On the other hand, it's still down roughly 92% from its high.
While Lemonade is growing at an impressive pace and narrowing its losses, it remains a high-risk stock. The company has the potential to deliver explosive returns for patient shareholders, but it still has a lot of proving itself to do and challenges to overcome.
