Lemonade stock price has gone parabolic, soaring for four consecutive weeks and reaching its highest level since December 2021. It has jumped by almost 300% from its lowest level in 2023 as the company unveiled its strategy to grow from $1 billion to $10 billion in the coming years. This rally has pushed its market cap to over $2.7 billion.
Growing insurance disruptor
Lemonade is a technology company that is disrupting the insurance industry using tools like artificial intelligence and data analytics. It uses its AI tool known as Maya to collect data and take customers through their insurance purchases, while Jim is used to pay claims.
The company has become highly popular in the United States and the management believes that it has more room to grow. This explains why its annual revenue has jumped from $67.3 million in 2019 to over $429 million in 2023.
The challenge, however, has been on how to grow its business profitably as its net loss has jumped from $108 million in 2019 to over $236 million in the last financial year.
The most recent financial results showed that Lemonade’s business was growing as its total revenue rose to $136.6 million in the last quarter from $114.5 million in the same period a year earlier.
Its nine-month revenue rose to $377 million from $314 million as the company continued to add new customers to its ecosystem. Its performance was also boosted by the rising premium prices. Recent data showed that insurance costs have risen by over 20% in the last 12 months, a trend that may continue in the coming years.
The number of customers rose by 17% to over 2.3 million, while the gross loss ratio improved to 73% from 94% two years ago. The gross loan ratio represents its exposure to loans as part of its total assets. It was the fifth consecutive quarter that Lemonade reported an improvement in the ratio.
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Lemonade’s gross profit jumped by 71% to $38 million, while the net free cash flow rose to $48 million. However, its net loss jumped to $67 million during the quarter.
Lemonade has a strong balance sheet with over $979 million in cash and equivalents, meaning that it will not need to raise cash soon.
Analysts believe that its revenue will continue growing in the coming years. Precisely, the average revenue guidance for the current quarter is 25.5% increase to $144.97 million.
Lemonade’s revenue will rise by 21.68% to $522 million this year, followed by 27% to $666.29 million in 2025. Its revenues will likely be much better because it has a long track record of beating analysts estimates.
Most importantly, analysts expect that its loss trajectory will continue improving. The loss per share is expected to move from $3.05 this year to $2.51 in the following year.
A ley concern is that the stock has moved much higher than the average earnings estimates. It was trading at $40, 57% higher than what analysts expect.
Lemonade stock price analysis
The weekly chart shows that the LMND stock price has moved sideways in the past few years. It remained inside the support and resistance levels at $12.60 and $24.52, where it has been at for a while.
The stock has now moved above the upper side of the resistance. It has also jumped above the 50-week and 25-week Exponential Moving Averages (EMA), which is a bullish sign.
The Relative Strength Index (RSI) and the Stochastic Oscillator have pointed upwards. It is approaching the 23.6% retracement level at $54.15. Therefore, the stock will likely continue rising as bulls target that level, which is about 33% from the current level.
A cross above the 23.6% retracement point will raise the odds of it rising to the 50% retracement point at $100, which is about 150% above the current level. A drop below the support at $24.5 will invalidate the bullish view
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