LMND - Lemonade: Close To Turning Profitable A Sour Taste On Valuation

2024-07-07 22:30:16 ET

Summary

• Lemonade's shares have lost 77% of their value since IPO in July 2020.
• The company uses technology and AI to disrupt the insurance industry with a focus on scale and customer acquisition.
• Despite improving financial performance, the company remains unprofitable, but it does have a path to potential profitability in the future.
• I value the company's shares at $17.83 per share, which implies about 9.1% upside from the current share price.
• The upside isn't enough to get me excited (as it's below the company's cost of equity) and I would have a preference for Kinsale Capital today.

Introduction

Since its IPO back in July 2020, shares of Lemonade, Inc. ( LMND ) have lost about 77% of their value. As a 'disruptor' in the insurance industry, the company has been facing losses in EBITDA and earnings as the company tries to build out scale, new product lines, and streamline operations in an effort to enhance efficiency and profitability. In this article, I'll assess the company's competitive advantage, the latest quarterly results, and provide what I think are the largest risks to the company and how I would go about valuing the business....

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