Insurtech Bet Lemonade Stock Is Low Enough To Buy Now

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  • Lemonade (LMND) could eventually transform the insurance market as we know it.
  • Still, the company and its shares remain undervalued on Wall Street.
  • Investors should consider the potential future value of Lemonade instead of focusing on the currently negative sentiment.

Source: Stephanie L Sanchez / Shutterstock.com

Based in New York Lemonade (NYSE:LMND) offers insurance for renters, landlords, life, and even pets. There is certainly no guarantee that LMND shares will rise in value, but there does appear to be an opportunity on the ground floor to invest in a truly disruptive company.

In a decade, Lemonade will either be a mainstay of the insurance industry or completely bankrupt. Investing in Lemonade is really an all or nothing proposition. Can you manage the risk?

Judging by the price action of LMND shares, it seems that few traders are ready to support the company for the long term. It’s a shame, because Lemonade could eventually redefine the insurance business for the benefit of customers, as well as shareholders.

LMND Lemonade, Inc. $24.86

What happens with LMND shares?

Taking us back to the start, Lemonade debuted at $50.06 on the New York Stock Exchange on July 2, 2020. There was a phase of hype, which was likely precipitated by the advent of meme stock trading in early 2020.

Like Reddit traders went wild on Wall Street, LMND shares peaked on Feb. 12, 2021, at $168.44. Not to be the bearer of bad news, but we probably won’t see this price again for quite a while, if at all.

After the hype phase passed, Lemonade stock price dropped into the $20s. Lately, loyal Lemonade investors might wonder if the suffering will ever end.

To make matters worse, the drop in share price might seem justified by Lemonade’s lack of profitability. To break down the numbers, Lemonade’s net profit loss went from $122.3 million in 2020 to $241.3 million in 2021.

This is a hard pill for data-driven investors to swallow. With that in mind, investing in LMND stocks is risky, even near its 52-week low.

To own Lemonade stock with confidence, you’ll need a strong stomach and, most importantly, a belief that Lemonade’s artificial intelligence (AI)-powered insurance business can transform an entire industry.

It’s an industry that resists disruption – but maybe disruption is just what we need right now.

Get people to make the change

To change the world, you have to change one mind at a time. Lemonade does this by attracting new customers, including some reluctant ones:

“About 90% of our current customers said they are not switching to Lemonade from another operator. We are well positioned to grow our customer base by continuing to attract first-time buyers, an underserved population that replenishes every year. .

If you’ve ever worked in a sales role, you should appreciate how difficult it is to get people to switch brands. How, then, did Lemonade convince people of its vision of replacing brokers and bureaucracy with robots and machine learning?

This is primarily the result of Lemonade’s desire to woo young, millennial, and Gen Z insurance customers. Younger insurance shoppers are likely more willing to try something new, especially that they haven’t spent half a century with a traditional insurance broker.

Lemonade’s focus on apps and technology likely appeals to younger insurance customers as well. Plus, Lemonade’s AI can apparently help customers cut costs, which is likely a strong selling point for millennial customers and Zoomers.

Above all, Lemonade emphasizes giving back. This might appeal to younger, more attentive customers. For example, Lemonade provides a Giveback feature. With this, the company aims “to donate the remaining money to causes that are close to our customers’ hearts”.

Also in the giving back category, Lemonade recently formed the Lemonade Crypto Climate Coalition. With this, the company plans to build and distribute “parametric, instantaneous, at-cost weather insurance to subsistence farmers and livestock ranchers in emerging markets.”

What you can do now

Make no mistake: owning LMND shares could result in serious capital losses. It’s a speculative bet no matter how you spin it.

On the other hand, Lemonade uses technology to create a better experience for insurance buyers. Additionally, the company seems strongly committed to giving back.

Millennials and Zoomers are a powerful demographic of customers. They have the power to radically change the insurance market. Will they choose Lemonade as their insurance company?

Only time will tell. Still, it’s exciting to consider just how much Lemonade could change the landscape of the insurance industry — and how far LMND stocks could go if they’re still around a decade from now.

As of the date of publication, David Moadel had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

David Moadel has delivered compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga and (of course) InvestorPlace.com. He is also the Chief Analyst and Market Researcher for Portfolio Wealth Global and hosts the popular YouTube financial channel Looking at the Markets.

The post Insurtech Bet Lemonade Stock Is Low Low Enough To Buy Now appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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