Lemonade touches a 52-week low, what's next for LMND stock?

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 Lemonade touches a 52-week low, what's next for LMND stock?
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  • Lemonade's gross loss ratio was 96%, up from 73% in the year-ago quarter.
  • Its revenue surged 100% YoY in Q4, FY21.
  • The company's In Force Premium (IFP) rose 78% YoY in the final quarter of fiscal 2021.

Lemonade, Inc. (LMND) stocks were down over 22% in pre-market trading on February 24. The decline came a day after it reported its fourth-quarter fiscal 2021 earnings results.

During the extended trading hours on Wednesday, February 23, the stocks of the insurance company were down over 16 per cent to US$19.26 per share.

Notably, the Lemonade stock closed at its 52 week low of US$22.95.

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Why have the stocks tumbled?

The investors seemed concerned by the fourth-quarter earnings results of the New York-based insurance company, as its gross loss ratio was 96%, up from 77% in the previous quarter and 73% in the year-ago quarter.

Meanwhile, the company's revenue increased by 100% YoY to US$41 million in Q4, FY21. Its net loss came in at US$70.3 million, or US$1.14 per share, against a loss of US$33.9 million, or US$0.60 per share in the comparable quarter of the previous year.

The company said that the increase in the loss ratio is mainly due to expanding its home and pet insurance business, which "demonstrate higher loss ratios" than their other stable operations.

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Lemonade (LMND) fourth-quarter fiscal 2021 earnings result

What's next for Lemonade?

The company said that it is working on new projects to improve profitability in the newer segments of the business. In addition to that, it also said that it expects its loss ratio to be under 75% in the future.

However, it also said that its loss ratio might remain higher than the expected range in the near term as its new business lines will need more time and cost to be matured.

The company's shares bumped up after it went public in July 2020. But the rally did not last long as both the losses and loss ratio have raised investors' concerns. Furthermore, the investors were disappointed by the acquisition of MetroMile, which fuelled more losses and an elevated loss ratio.

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However, the company lauded the acquisition as it launched its Lemonade Car auto insurance last year, and the MetroMile deal aided it to enter various markets faster. Now, the company is expecting to turn a profit quickly through it.

Bottom line

The experts are still optimistic about the LMND stock due to various reasons. First, Lemonade's In Force Premium (IFP), a measure for the aggregate annualized premium for customers, rose 78% YoY to US$380 million in Q4, FY21, while its customer count increased by 43% YoY to more than 1.42 million.

In addition to that, its increased premium per policy, which rose 25% YoY to US$266 million, suggested that more users are taking out the company's policy even at the higher rates.

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