Fintech insurance platform provider Lemonade (NYSE: LMND) The stock jumped from its low of $15.99 in May to double after posting earnings in August 2022. The insurtech disruptor is trying to break the conventional mold in the $5 trillion insurance industry. To be artificial intelligence (AI) powered platform simplifies the signup and onboarding process and quickly approves claims and payouts to the satisfaction of its customers. Lemonade appears to be benefiting from the process bottlenecks consumers experience when using traditional insurers. They offer savings of up to 80% on policies compared to traditional carriers, as well as streamlined claims processing and charitable returns culminating in a frictionless experience. All this and more can be done simply and easily in the app without having to file a ton of paperwork through a broker. all the cost savings help keep policy costs low. Does this sound too good to be true? The market thought so after the hype subsided, and the stock price fell more than (-80%) from its less than two-year highs to the recession. While millennials may believe in the products, the Generation X and older demographics have been a more difficult group since the company is relatively new and was founded in 2015. Nearly 87% of their customers are new insurance buyers. Will Lemonade the? turning point before the time and money run out?
AI vs Humans
The insurance industry is run by decades to age-old players such as All State (NYSE: ALL), Cigna (NYSE: CI), Progressive (PGR) and Berkshire Hathaway (NYSE: BRK.A). Insurers take advantage of the friction customers endure. Claims that are delayed or denied because of litigation bottlenecks equate to more profit for insurers as they collect more interest on the money that sits longer in the treasury. Traditionally, well-paid human actuaries apply science to the drafting, insuring and issuing of policies. Lemonade uses AI-powered actuaries to design policies in seconds using its data and predictive analytics. The more policies it issues and the more data it collects, the longer it needs to measurably improve the quality of the policies. Loss ratios are expected to start out big and get smaller through optimization and refinement over time. Lemonade shows the successive improvement in loss ratios that fell from 97% to 86% in the last three quarters. Users can get a quote in minutes using simple AI chatbots Maya and Jim through the website or mobile app. Lemonade currently offers home, rental, life, pet, and auto insurance in most US states.
Growth is back
On August 8, 2021, Lemonade announced its second quarter 2022 results for the quarter ended June 2022. $1.31) with $0.21. Revenues were up 77.3% year-over-year (year-on-year) to $50 million, better than consensus analyst estimates of $47.56 million. The number of customers increased by 31% to 1.58 million. Premiums per customer increased 18% to $290. The gross loss ratio of 86% was a sequential improvement of 90% in Q1 2022 and 96% in Q4 2021.
Is Q3 the tipping point?
For the third quarter of 2022, Lemonade expects sales to be between $63 million and $65 million, compared to analyst estimates of $56.98 million. Losses are expected to peak in the third quarter of 2022 and then begin to contract “charting a clear path to profitability.” For the full year 2022, Lemonade expects revenue of $236 million to $239 million, compared to $214.67 million analyst estimates. EBITDA loss improved and came in between (-$245 million) to (-$240 million) from the prior (-$280 million) to (-265 million) range. The prevailing premiums guideline (IFP) was increased from $610 million to $615 million, from $535 million to $545 million. Daniel Schreiber, CEO of Lemonade, commented, “Overall, we feel like our business is starting to take off with improved loss ratios, increasing cross-sells and upsells, and the herbal book. All three lead us to believe we’re seeing peak losses this quarter. will see losses down in the fourth quarter and even if we continue to grow, we expect the loss to decline year-over-year thereafter as we progress on our path to profitability.”
This is what the graph says
Using the gun cards on the weekly and daily timeframes provides a short-term accurate representation of the price action playing field for LMND stocks. The weekly gun chart reversed after the downtrend bottomed near $16.18 Fibonacci (fib) level. The weekly breakout and uptrend has a rising 5-period moving average (MA) support at $23.86, followed by the 15-period MA at $21.35. Shares crossed the weekly upper Bollinger Bands (BBs) at $29.80 before falling back to the weekly market structure layer (MSL) buy trigger for $25.14. The weekly 50-period MA resistance is falling to $35.69. The weekly stochastic formed a mini pup oscillation to the 60 band. The daily gun chart uptrend peaked just above $32.68 fib before collapsing on the stochastic mini-inverse pup trap through the 80 band. The 200-period daily MA of 29.85 failed to hold a support and the 5-period MA fell to $28.94. The 15-period daily MA support failed to stop the sale at $26.67. The daily lower BBs rise to $12.94. Cautious investors can await the daily stochastic oscillation before considering attractive pullback levels before considering scaling up to a position on the $21.93 fib, $20.33 fib, $18.51 fib, $17.60 and the $16.18 fib level.