Lemonade (LMND) Potential Lower Loss Might Give Price Volatility Upside

The consensus EPS Estimate is -$0.75 and the consensus Revenue Estimate is $111.51M (+26.1% Y/Y). Lemonade is expected to show a rise in quarterly revenue when it reports results on 27 Feb for the period ending 31 Dec 2023.

Technical are showing Buy Signal for short term (20-day MA), similar signal for the other moving averages are showing Buy as well. But we need to consider how Lemonade have performed after its last earnings release.

Lemonade’s (LMND) 10-Day exponential moving average is 17.31, while Lemonade’s (LMND) share price is $20.03, making it a Buy.

Lemonade’s (LMND) 100-Day exponential moving average is 16.21, while Lemonade’s (LMND) share price is $20.03, making it a Buy.

Lemonade’s (LMND) stock price is $20.03 and Lemonade’s (LMND) 50-day simple moving average is 16.93, creating a Buy signal.

Lemonade’s (LMND) stock price is $20.03 and Lemonade’s (LMND) 100-day simple moving average is 15.69, creating a Buy signal.

Lemonade’s (LMND) stock price is $20.03 and Lemonade’s (LMND) 200-day simple moving average is 16.14, creating a Buy signal.

LMND last reported earnings on 01 Nov 2023 after the market close (AMC). LMND shares gained +47.1% the day following the earnings announcement to close at 16.18. Following its earnings release, 117 days ago, LMND stock has drifted +23.8% higher.

From the time it announced earnings, LMND traded in a range between 13.72 and 20.59. The last price (20.03) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 21.7%. Even though Lemonade reported a loss in its last quarter on 01 Nov, but we saw a more than 40% positive price effect movement. For this upcoming quarter, I would be expecting a better-than-expected EPS, and this should give us a much better positive price effect.

The options market overestimated LMND stocks earnings move 50% of the time in the last 12 quarters. The predicted move after earnings announcement was ±14.0% on average vs an average of the actual earnings moves of 14.8% (in absolute terms). This shows you that LMND tended to be more volatile than the options market predicted for the earnings stock price reaction.

Option valuation suggest that Lemonade is undervalued, we should be seeing price volatility but we can expect positive upside move if Lemonade is able to post better than 75 cents loss earnings per share.

Looking at the adoption of online services like insurance and banking, Lemonade should be able to gain better market share, this should help them to boost their earnings.

Their customer base is mostly young professional who are in the midst of doing life planning as well as financial planning, we should be seeing Lemonade closing their loss gap.

Appreciate if you could share your thoughts in the comment section whether you think Lemonade would be able to close the estimated loss earnings per share.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.