Lemonade Slides Over 7% Despite Outperforming 4Q Estimates

Lemonade stock was down about 7% in Monday’s extended trading session despite the company reporting better-than-expected fourth quarter results. While the insurance company’s 2021 revenue outlook was higher than the Street’s estimates, its 1Q guidance failed to lift investors’ sentiment.

The company forecasts 1Q 2021 revenues in the range of $21.5-$22.5 million, the mid-point of which ($22 million) is marginally lower than the consensus estimates of $22.1 million.

Meanwhile, Lemonade (LMND) reported 4Q 2020 revenues of $20.5 million that topped the consensus estimates of $19.1 million. Furthermore, a 4Q loss of $0.60 per share was narrower than analysts’ loss expectations of $0.65 per share and the prior-year period’s loss of $2.90 per share. Adjusted EBITDA loss of $29.7 million improved 5% year-over-year, due to operating expense efficiency.

The in force premium (IFP) rose 87% year-on-year to $213 million at the end of the fourth quarter, driven by a 56% increase in customer count along with a 20% increase in premium per customer. The company reached a milestone of one million customers at the end of 2020.

The company said that premium per customer increased due to “the continued shift of our business mix toward products with higher average policy values, an increasing prevalence of multiple policies per customer, as well as growth in the overall average policy value and pricing impact.”

As for 2021, Lemonade expects revenues in the range of $114-$117 million, higher than the Street’s estimates of $111.3 million. (See Lemonade stock analysis on TipRanks)

On Jan. 21, Piper Sandler analyst Arvind Ramnani raised the stock’s price target to $163 (23% upside potential) from $105 and maintained a Buy rating. In a note to investors, the analyst said that he expects Lemonade to continue to widen scale given its digital first approach, innovative investments, market growth and expansion capabilities.

Overall, the Street has a cautiously optimistic outlook on the stock, with a Moderate Buy consensus rating based on 1 Buy and 1 Hold. The average analyst price target of $116.50 implies downside potential of about 12% to current levels. Shares have gained about 91% over the past 12 months.

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on LMND, with 5% of investors adding exposure to LMND stock over the past 30 days.