How a reverse is happening to Lemonade after losing 77% of top value?

$Lemonade, Inc.(LMND)$ jumped 20% yesterday, and as a company in the same industry as Warren Buffett's $Berkshire Hathaway(BRK.A)$ , its volatility has been highlighted, and the stock has been on a roller coaster ride since its IPO.

However, after the recent release of its results, its bottom features are also visible, with a series of positive growth metrics allowing investors to trade on its ongoing positive expectations as well.

Q3 performance

1. Premium growth:

   • Compulsory premiums: Lemonade's compulsory premiums increased by 24% to $889 million, with excellent performance in attracting new customers and increasing premiums for existing customers

   • Number of customers: Number of customers increased by 17% to 2.3 million

   • Premium per customer: reached $384, an increase of 6%, mainly due to higher premiums and higher policy coverage.

2. Revenue performance: total revenue grew 19% year-over-year, exceeding market expectations

3. Profit performance: gross profit gross profit increased 71%, net loss of $68 million, loss per share of 95 cents, down 10% from a year ago, and adjusted EBITDA loss of $49 million, an increase compared to a year ago.

   

Cost Control and Operating Efficiency

• OPERATING EXPENSES: Operating expenses, excluding losses and loss adjustment expenses, increased 27% year-over-year to $125 million.This increase was primarily due to higher sales and marketing expenditures to support the Company's continued market expansion and brand building23.

• Operations Management: Lemonade has reduced personnel expenses by approximately 7% by controlling the number of employees, thereby offsetting to some extent the increase in other expenses.This human resource management strategy has helped the company remain cost effective.

  

Outlooks

• CASH FLOW POSITION: As of the end of the third quarter, the Company's total cash and cash equivalents and investments increased significantly to approximately $979 million, demonstrating a positive cash flow trend.

• AI Plus: AI technology is used to optimize costs, improve sales and manage risk.This technology-driven approach allows the company to stay ahead of the competitive insurance market, especially as traditional insurers face challenges.AI not only increases operational efficiency, but also improves the customer experience, which in turn attracts more users.

• Market Expansion Plans: Lemonade continues to advance its expansion strategy in the pet insurance, auto insurance, and European markets, which will further drive its revenue growth and market share gains.

• Diversified Business Model: Expansion into pet and auto insurance, as well as international markets, allows Lemonade to generate revenues in a variety of areas, thereby mitigating the risks associated with volatility in a single market, such as the hurricanes in North Carolina.

• Macroeconomic trends: If the economic environment improves, particularly with lower interest rates, this could further drive consumer spending and demand for insurance, which could boost Lemonade's business growth.

Valuation and price

Lemonade's stock price has fallen 77% since its IPO in 2020, but the recent rebound trend is part of the market consensus.

So what kind of expectations are investors trading on?The biggest positive is a breakeven point of earnings and a turnaround.

Management expects positive gold flow by the end of 2024 and profitability by 2025.