- Root shares rose 53% last week, which we believe was due to speculation amid a market rebound and not warranted by fundamentals.
- Business shrunk in Q4 2021 after drastic cuts in marketing but remained heavily loss-making. The headcount was cut by 20% in January.
- Management guides to a significant year-on-year decline in premiums and $200m in Operating Loss in H1 2022.
- Root is increasingly relying on Carvana as a distribution channel, where it does not use telematics, its supposed differentiator.
- At $2.06, Root is trading below net cash and at 0.7x Q4 Premiums In Force, but we do not believe the business will improve. Avoid.
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Root: Shares Up 53% Last Week And Still Trading Below Cash - But Avoid