It’s definitely fair to say that New York-based Lemonade (NYSE:LMND) is on a mission. If you’re on board with the idea of using AI technology to disrupt insurance as we know it, then a position in LMND stock might be right for you.
Just to give you a refresher, Lemonade offers various types of insurance — but with a twist (or two). For one thing, the company seeks to replace brokers and bureaucracy with bots and machine learning, thereby aiming for zero paperwork and “instant everything.”
At the same time, Lemonade gives unused premiums to nonprofits selected by its community. As you can see, there’s no other insurance business quite like this one.
Yet, judging by the price action of LMND stock, it appears that Wall Street has soured on this audacious insure-tech upstart. So, let’s start off with a tall, cool glass of technical analysis, before jumping into Lemonade’s intriguing fundamentals.
A Closer Look at LMND Stock
It really wasn’t long ago — July 2, 2020to be exact — when Lemonade debuted on the New York Stock Exchange.
Lemonade had originally indicated a price range of $23 to $26 for its common stock shares. Not long afterwards, though, the company raised the initial public offering (IPO) share price to $29.
Yet, probably due to an overabundance of hype in the IPO market, LMND stock debuted at $50.06. Four days later, on July 6, 2020, the stock catapulted even further, reaching $96.51.
If you thought that was mind-blowing, check this out. By Jan. 11, 2021 the Lemonade share price attained a nose-bleed all-time high of $188.30.
The following weeks weren’t so sweet, though. A prolonged decline quickly began, with LMND stock dropping below $100 in March and below $75 in August.
By the beginning of this month, traders were able to pick up Lemonade shares for $65 apiece.
So, if you’ve been patiently sitting on the sidelines — or if you’re just discovering Lemonade today — then perhaps there’s a bargain to be found here.
Some Tasty Fiscal Stats
A bold start-up like Lemonade is bound to go through some growing pains.
Yet, the learning curve for Lemonade seems to have been surprisingly quick and painless.
Already, in the Q2 2021, we could detect rapid improvement based on several metrics.
One of these metrics is known as in-force premium. Being “in force” basically means that a life insurance policy has been paid and is active.
During the most recently reported quarter, Lemonade reported $297 million worth of in-force premium.
Year-over-year, that figure represents a very impressive 91% increase.
Furthermore, the company had 1,206,172 total customers at the quarter’s end, or 48% year-over-year growth.
Plus, on a per-customer basis, Lemonade reported collecting $246 in premiums during 2021’s second quarter. That’s a year-over-year improvement of 29% — not too shabby.
Finally, the company generated $67 million in gross earned premium, marking a sweet 90% YoY increase.
Prevention and Profits
If you’re starting to get the impression that a short squeeze won’t be necessary to propel the price of LMND stock, then I’ve done my job today.
But, I’m not quite finished. Here’s something from Lemonade which you probably didn’t expect.
Call it a “pet project,” if you’d like. According to press release from Lemonade, 70% of U.S. households have a pet — a trend that seems to be on the rise, possibly due to the onset of the Covid-19 pandemic. InvestorPlace readers may already be familiar with this from coverage of Zomedica (NYSEAMERICAN:ZOM) or other pet stocks, like Chewy (NYSE:CHWY).
Moreover, one in four pet parents surveyed in May 2021 said that they were “worried about being able to afford vet care.”
So, it’s machine learning and Lemonade to the rescue. Reportedly, the company’s pet health insurance product, Lemonade Pet, just launched a new preventative care package designed specifically for puppies and kittens under two years old.
This insurance package offers coverage for procedures like spaying and neutering, micro-chipping, flea medication and up to six vaccines or boosters.
It’s an interesting, niche-targeted foray into the the $2 billion U.S. pet health insurance industry.
As usual, it appears that Lemonade is radically disrupting the traditional insurance paradigm – and in this instance, healthcare as well.
“Offering a preventative care package for puppies and kittens transforms the way pet parents think about going to the vet,” elaborated Stephanie Liff, Lemonade’s vet health expert.
“Instead of rushing over when something bad happens, or as the dog or cat grows old, people should bring pets in when they’re young, to keep them healthy as they mature,” Liff added.
The Bottom Line
Overeager IPO traders may have pushed the LMND stock price too far, too far. In hindsight, a downfall seems like it was inevitable.
Today, though, there appears to be a great opportunity for investors. Lemonade isn’t your typical insurance business, but the company’s strength comes from its uniqueness.
It’s a bold company, and only risk-tolerant investors should get involved. But for all we know, a stock-price turnaround could help the shareholders turn this lemon into Lemonade.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.