Should I buy Lemonade shares after the current dip?

Lemonade, Inc. (NYSE: LMND) shares have weakened more than 15% last trading week, even though the company reported better than expected third-quarter results this month. Total revenue has increased by 100.6% Y/Y to $35.7 million, but the company is still not profitable.

Lemonade is still not profitable

Lemonade is a company that provides various insurance products in the United States and Europe, while its insurance products cover stolen or damaged property and personal liability.

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Lemonade also offers renters, homeowners, pet, and life insurance products and has approximately one million customers, and 70% of its customers are under the age of 35.

Lemonade reported better than expected third-quarter results this month; total revenue has increased by 100.6% Y/Y to $35.7 million, $2.18 million above expectations, while the GAAP earnings per share were -$1.08 (beats by $0.08). Timothy Bixby, CFO of Lemonade, said:

We had another strong quarter of growth driven by additions of new customers, as well as the continued increase in premium per customer. We also continue to add new Lemonade team members in all areas of the company in support of customer and premium growth and both current and future product launches.

Premium per customer increased 26% compared with the same period in 2020, and gross earned premium in the third quarter increased 86% to $79.6 million.

The company had a record volume of cross-sales at about $5 million while the gross loss ratio in the third quarter was 77%, up from 72% a year ago.

The increase in loss ratio masks an important underlying trend, and these gains were primarily driven by the impact of the company’s rapidly growing new business lines.

Lemonade is in a good position to grow its business, but this stock is not undervalued with a $3.33 billion market capitalization. The company is still not profitable; net loss in the third quarter was $66.4 million, and adjusted EBITDA loss was $51.3 million for the same period.

For the fourth quarter, Lemonade expects an adjusted EBITDA loss of $50 million, and there are better long-term investment opportunities at the moment.

Bears control the price

Lemonade shares have weakened more than 15% last trading week, and according to technical analysis, the bears remain in control of the price action. Falling below $50 supports the continuation of the negative trend, and the next price target could be at $45.

On the other side, if the price jumps above $60, it would signal to trade Lemonade shares, and we have the open way to $65.

Summary

Lemonade shares have weakened more than 15% last trading week, even though the company reported better than expected third-quarter results this month. Lemonade is in a good position to grow its business, but according to technical analysis, the bears remain in control of the price action.

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