Lemonade Stock Looks Like a Bargain at Current Pricing

LMND is down 50% since the start of the year

May 18, 2022 at 10:08 AM
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Insurance provider Lemonade, Inc. (NYSE:LMND) has lost almost 50% in 2022, and 71.4% year-over-year. However, the stock has added nearly 30% since hitting a record low of $15.99 on May 12. It's been mostly downhill for LMND for most of the year, with the 80-day moving average acting as a ceiling for several rally attempts.

lmnd chart may 18

The stock has been heavily shorted, with short interest rising 4% in the last reporting period, and making up a solid 36.4% of LMND's available float, or over eight days' worth of pent-up buying power. 

Options traders have also taken an incredibly bearish stance. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LMND sports a 10-day put/call volume ratio of 2.99, which sits higher than all but 1% of readings from the past year. In other words, puts have been unusually popular of late. 

The insurance company is still very early on in the growth stage and far from profitability. For fiscal 2021, Lemonade reported $128.4 million in revenues and $241.3 million in net losses, marking a 36% increase on the top line and a -$119 million decrease on the bottom line since fiscal 2020. As a result, LMND trades at relatively high price-sales ratio of 8.85.

Nonetheless, Lemonade has delivered an incredible growth rate, having increased its annual revenues 563% since fiscal 2018. Lemonade’s trailing 12-month revenues are also currently up 16.2% since fiscal 2021. In addition, LMND is estimated to grow revenues 66.2% for fiscal 2022 and 54.1% for fiscal 2023. Furthermore, the insurance name holds an impressive balance sheet with $381 million in cash and just $22.3 million in total debt, allowing the business to continue expanding at a rapid rate and making Lemonade stock one of the safer small-cap growth stocks on the market.

 

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