Should Lemonade Be in Your Portfolio This Summer?

: LMND | Lemonade Inc. News, Ratings, and Charts

LMND – Although insurance companies benefit from rising interest rates, Lemonade (LMND) failed to surpass the consensus EPS estimate in the last reported quarter. Analysts expect its EPS to remain negative in fiscal 2022 and 2023. So, will LMND be able to turn around in this rising interest rate environment? Read on to find our view….

Lemonade, Inc. (LMND) provides various insurance products in the United States and Europe. Its products cover stolen or damaged property and personal liability. The company also offers renters, homeowners, pets, life insurance products, and landlord insurance policies. In addition, it operates as an agent for other insurance companies.

The consumer price index data revealed that inflation had risen 8.6% in May from the year-ago period, the highest since December 1981. In its efforts to tame the surging inflation, the Federal Reserve has increased the benchmark interest rates thrice this year, with the recent 75 basis-point increase happening to be its most aggressive rate hike since 1994.

In a rising interest rate environment, insurers usually benefit. Higher bond yields increase the risk-free returns of insurance companies because they invest in high-grade fixed income instruments to meet their promised returns to policyholders.

For the first quarter ended March 31, LMND reported an 88.5% year-over-year increase in revenue. However, its net loss and adjusted EBITDA loss widened. Moreover, the customer growth declined over the last five quarters. Despite increasing 66% to $419 million in the previous quarter, the company’s in-force premium (IFP) is on a downtrend.

LMND’s stock has declined 54.3% in price year-to-date and 82.6% over the past year to close the last trading session at $19.23. The stock is currently trading 83.4% below its 52-week high of $115.85.

Here’s what could influence LMND’s performance in the upcoming months:

Disappointing Financials

LMND’s net loss widened 52.6% year-over-year to $74.80 million for the first quarter ended March 31, 2022. The company’s adjusted EBITDA loss widened 38.9% year-over-year to $57.40 million. Also, its total expense increased 63.2% year-over-year to $116.90 million. In addition, its loss per share widened 49.3% year-over-year.

Mixed Analyst Estimates

Analysts expect LMND’s revenue for fiscal 2022 and 2023 to increase 66.2% and 54.1% year-over-year to $213.41 million and $328.87 million, respectively. However, its earnings per share for fiscal 2022 and 2023 are expected to remain negative.

Stretched Valuation

In terms of forward P/B, LMND’s 2.14x is 99.2% higher than the 1.08x industry average. Likewise, its 5.74x forward P/S is 102.7% higher than the 2.83x industry average. And the stock’s 4.75x forward EV/S is 78.8% higher than the 2.66x industry average.

Lower-than-industry Profitability

LMND’s trailing-12-month net income margin is negative compared to the 29.01% industry average. Likewise, its trailing-12-month EBITDA margin is negative compared to the 23.03% industry average. Furthermore, the stock’s 0.10% trailing-12-month asset turnover ratio is 51.8% lower than the industry average of 0.21%.

POWR Ratings Reflect Bleak Prospects

LMND has an overall F rating, equating to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LMND has an F grade for Value, in sync with its stretched valuation.

It has a D grade for Quality, consistent with its negative levered FCF margin compared to the 17.46% industry average. Furthermore, its disappointing financials justify its D grade for Growth.

LMND is ranked last out of 55 stocks in the Insurance – Property & Casualty industry. Click here to access LMND’s ratings for Momentum, Stability, and Sentiment.

Bottom Line

Although the rising interest rate environment bodes well for insurers, LMND’s EPS is expected to remain negative in fiscal 2022 and 2023. The stock is currently trading below its 50-day and 200-day moving averages of $20.27 and $38.04, respectively, indicating a downtrend.

Given its disappointing earnings, stretched valuation, and lower-than-industry profitability, we think it could be wise to avoid the stock now.

How Does Lemonade, Inc. (LMND) Stack Up Against Its Peers?

LMND has an overall POWR Rating of F, equating to a Strong Sell rating. Therefore, one might want to consider investing in the following Insurance – Property & Casualty stocks with a B (Buy) rating, such as W. R. Berkley Corporation (WRB) and Loews Corporation (L).


LMND shares were unchanged in premarket trading Wednesday. Year-to-date, LMND has declined -54.33%, versus a -19.26% rise in the benchmark S&P 500 index during the same period.


About the Author: Dipanjan Banchur


Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
LMNDGet RatingGet RatingGet Rating
WRBGet RatingGet RatingGet Rating
LGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Recession or Not Recession…That Is the Question

Every investor appreciates that recessions and bear markets go hand in hand. But the definition of a recession often seems more difficult to pin down. So are we in a recession? And if not, then does that mean that disaster has been averted or that the pain train is still rolling towards investors? This is an important debate because it helps us appreciate what lies ahead for the stock market (SPY). We will tackle this vital topic in this week's commentary. Read on below...

:  |  News, Ratings, and Charts

3 Cybersecurity Stocks to Buy on the Pullback

Tech stocks are rallying. Within the sector, cybersecurity stocks offer the best combination of growth and value especially as the sector's importance grows everyday. Read on to find out why investors should consider buying top cybersecurity stocks like Fortinet (FTNT), Qualys (QLYS), and OneSpan (OSPN).

:  |  News, Ratings, and Charts

4 Big Reasons Why the Bear Rally Is Nearing an End…

The Stock Market (SPY) has put on an impressive rally over the last few weeks, leading many investors to believe that the bull is ready to resume its run. However, there are multiple reasons to believe the bear market is far from over. I lay out 4 of the main reasons below and explain how you can profit from the volatile markets that lie ahead. Read on below for more…

:  |  News, Ratings, and Charts

Is Costco Stock Still a Buy Amid Retail Troubles?

Retail companies have faced significant headwinds this year due to sky-high inflation and supply chain disruptions. However, Costco Wholesale's (COST) strong revenue performance and consistent margins have helped the stock to remain resilient amid retail troubles. So is this stock worth adding to your portfolio now? Let’s find out…

:  |  News, Ratings, and Charts

4 Big Reasons Why the Bear Rally Is Nearing an End…

The Stock Market (SPY) has put on an impressive rally over the last few weeks, leading many investors to believe that the bull is ready to resume its run. However, there are multiple reasons to believe the bear market is far from over. I lay out 4 of the main reasons below and explain how you can profit from the volatile markets that lie ahead. Read on below for more…

Read More Stories

More Lemonade Inc. (LMND) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All LMND News