MILE - Root: Major Reversals In Growth And Loss Ratio In Q2 Results
- Root's Q2 results were a major disappointment, with both a significant cut in growth expectations and higher-than-expected losses.
- Management now expects lower growth and a higher loss in 2021, further near-term losses in Direct Contribution, and top-line declines in 2022.
- Actual Q2 results showed modest sequential growth but much higher losses, due to both a worse Loss Ratio and higher marketing spend.
- 2020 performance now seems to owe more to COVID, two key executives left in June, and Root's business model looks more unproven.
- At $6.87, Root is trading at 2.4x premiums, outside our valuation parameters and offering little margin of safety. We remain Neutral.
For further details see:
Root: Major Reversals In Growth And Loss Ratio In Q2 Results