Lemonade Plunges 22% after Q4 Earnings Miss & Weak Guidance

Shares of Lemonade Inc. (NYSE: LMND) are trading down over 22% during the pre-market trading, at the time of writing, after the company reported mixed results for the fourth quarter with earnings missing and revenue beating expectations.

Lemonade is an insurance company offering a variety of services including pet, life, car, home, and renters’ insurance. Its shares have lost 84.8% over the past year.

Mixed Q4 Results

Lemonade reported a quarterly loss of $1.14 per share, 1 cent lower than the analysts’ estimated loss of $1.13 per share and wider than the prior-year quarter loss of $0.60 per share. The wider-than-expected loss was due to a higher loss ratio from sales to home and pet insurers, increased hiring for Lemonade Car, as well as higher marketing spend.

Q4 revenue doubled to $41 million and marginally surpassed the analysts’ estimates of $39.39 million. The robust revenue growth was driven by higher gross earned premiums, and an increase in net investment income and commission income.

Notably, In Force Premium (IFP) jumped 78% year-on-year to $380.1 in Q4, aided by a 43% increase in customer count and a 25% increase in premium per customer.

At quarter-end, customer count advanced 43% to 1,427,481, and Premium per customer stood at $266.

For full-year fiscal 2021, revenue climbed 36% annually to $128.4 million and net loss came in higher than FY20 loss at $3.94 per share.

Q1 and FY22 Outlook 

In Q1FY22, Lemonade expects revenue to be in the range of $41 million to $43 million, lower than the consensus of $43 million. The IFP is expected to be between $405 million and $410 million.

For FY22 guidance, Lemonade has excluded the impact from the Metromile acquisition, which is expected to close in Q2FY22.

For FY22, Lemonade projects revenue to be between $202 million and $205 million, again lower than the consensus estimate of $219 million. Meanwhile, IFP is projected to be between $530 million and $540 million. 

Official Comments

In a letter to shareholders, CFO Tim Bixby, Lemonade said, “We diversified our book by scaling our recently launched higher-premium products, while using our expanded portfolio to increase bundling, cross-selling and upselling. These combined to grow Premium per customer by $53 in 2021, significantly outpacing prior year’s $36, itself a record year. We expect to beat this record again and again in the coming years as our newer products, and the resultant bundles we can offer, buoy this metric.”

Consensus View

The LMND stock has a Hold consensus rating based on 1 Buy, 1 Hold, and 2 Sells. The average Lemonade price target of $44 implies 112.36% upside potential to current levels.

Blogger Opinions:

TipRanks data shows that financial blogger opinions are 75% Bullish on LMND, compared to a sector average of 71%.

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