- Root stock closed at $8.99 on Thursday, one third of its $27 IPO price last October, having fallen another 33% since our initiation.
- Q1 2021 results released on May 5 were strong operationally, with growth resuming after 3 quarters and Loss Ratio again improving.
- Root is increasing its marketing spend and expanding into more states, and 2021 outlook is still for Gross Written Premiums to grow 31-39%.
- However, we see no sign that Root's share price decline will reverse soon, partly due to wider sentiment; valuation still exceeds 3x premiums.
- Root is outside our investment parameters, and our previous hope of a technical rebound was wrong. We downgrade our rating to Neutral.
For further details see:
Root Stock: Solid Q1 Earnings Yet Down 67% From IPO, Not Stabilizing