Lemonade Beats 3Q Estimates, Issues Strong Forecast

Shares of online insurer Lemonade are rising 3.2% in pre-market trading today as the company reported better-than-expected 3Q results and full-year outlook.

Lemonade’s (LMND) 3Q revenue declined 6.3% year-over-year to $17.8 million but exceeded analysts’ estimate of $14.7 million. In force premium grew 99% year-over-year to $188.9 million, driven by a 67% rise in the number of customers and a 19% gain in premium per customer.

Meanwhile, net loss came in at $0.57 per share in 3Q20, reflecting a major improvement compared to a net loss of $2.78 per share in 3Q19. Analysts were expecting a higher loss per share of $0.64. Earnings benefited from operating expense efficiencies.

Additionally, Lemonade announced its plans to test a life insurance product in the next 90 days. The company said that it has established the Lemonade Life Insurance Agency for entering the term life insurance market. The company also stated that it will enter the France market in the fourth quarter as part of its plans to capture growth in Europe. (See LMND stock analysis on TipRanks)

Coming to guidance, Lemonade expects 4Q revenue of between $18 million-$19 million and In force premium between $200 million-$205 million. It predicts 4Q adjusted EBITDA loss to be between $32 million-$34 million. For the full year, Lemonade expects revenue in the range of $91 million-$93 million and adjusted EBITDA loss of between $100 million-$103 million. The company’s guidance came in ahead of analysts’ forecasts for 4Q revenue of $16.8 million and 2020 revenue of $87.5 million.

Recently, Piper Sandler analyst Arvind Ramnani initiated coverage of Lemonade with a Buy rating and a price target of $63. In a research note to investors, Ramnani stated that Lemonade is a “disruptive” insurance provider competing against legacy players with a digital and technology-forward competitive advantage. He also noted that the company’s lockup expiration will free up 33% of restricted shares on Nov. 12 and believes that any weakness in the shares should be used as a buying opportunity.

The Street is cautious about Lemonade, with a Hold consensus based on 1 Buy, 3 Holds and 1 Sell. The average analyst price target stands at $62.25 and indicates a possible downside of about 6% in the months ahead. Lemonade made its debut on the NYSE in July and has risen 5% over the last three months.

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