I'm Squeezing Out a New Price Target for Lemonade
AI insurance provider LMND is breaking out, but how high will the stock fly?
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What’s better than a cool sip of Lemonade on a hot August afternoon?
On Wednesday, investors were enjoying the sweet taste of Lemonade LMND, as shares popped for a gain of 9.36%. Lemonade is a New York-based insurance company that is leveraging technology to flip the industry on its head.
Lemonade is an AI-Fueled Insurance Play
What differentiates Lemonade from other insurance providers? A newer entrant into the insurance arena, the company was founded in 2015. Shares of Lemonade were publicly traded for the first time in June of 2020.
Lemonade relies heavily on AI. Claims are often handled by chatbots, and interactions with customers are integrated into Lemonade’s machine learning algorithm.
The company’s emphasis on AI allows Lemonade to operate with a crew of just 1,300 employees. Compare this to 30,000 employees for Geico, and 66,000 for The Progressive Corporation PGR.
Because of the company’s low overhead, Lemonade can offer insurance at a lower price point than many of its competitors.
More Upside Ahead for Lemonade?
On Aug. 5, Lemonade reported second quarter earnings, revealing a smaller-than-expected loss, along with better-than-expected revenues.
Keep in mind that Lemonade is a smaller company, with a market capitalization of just $4.3 billion. This means that moves in either direction can be sudden and dramatic.
Well, the stock is making sudden and dramatic moves, and the bulls are loving it.
Lemonade has just broken out of a nine-month long consolidation pattern (shaded yellow). Based on the pattern, the stock’s momentum, and the overall trend of the market, we’re giving Lemonade a price target of $85.
Party On, Bulls!
Thanks to the persistent strength of the current bull market, several of our recent picks have hit their targets quickly. For example, Reddit RDDT managed to reach its target in less than two weeks, as described here.
This phenomenon is due to the favorability of current market conditions, and nothing more.
Sometimes, traders have a bad habit of believing that they’re better than they actually are, when their outperformance is merely due to a cooperative market. Then, when the market ceases to cooperate, they realize that they weren’t quite as clever as they previously believed.
Let’s not be that guy or gal. Plan your exits in advance, and take partial profits to reduce exposure.
Know that eventually, this party will end. In the meantime, party on.
At the time of Ponsi was long LMND.
