Why has the lemonade stock been so volatile?
Insurance technology company Lemonade (NYSE: LMND) exploded after its IPO in July 2020. The stock has stumbled considerably since then, but does this performance mean that the investment thesis has changed?
In this video from “The 5” on Motley Fool Live, recorded September 23, Fool.com contributor Brian Withers explains why this title has had such a crazy run and whether or not he thinks it’s worth hanging onto.
Brian Withers: I’m going to talk a bit about one kind of popular among fools is lemonade. [laughs] It certainly went up and beat the market for a while and then it kind of collapsed. It has a lot to do with, I think it’s just a start-up business and they still have a lot to prove and I think part of the rise of the action was more what Brian Feroldi likes to call the price- ratio hope where there’s a lot of potential here and Lemonade could absolutely capture a huge market and be bagging 10 in the long run, but sometimes investors have shorter windows than they do. It really takes companies to enter and realize and get into new markets over time. I think the stock has sold out a bit. I mean 40% off its highest maybe, but to me the same reason I invested in it six or eight months ago shortly after its IPO still seems be the same thesis and all the good things happen. It’s just going to take a while for that to really translate into some sort of revenue growth, as well as once they get into Lemonade auto, which I think is a big deal. huge opportunity for this, which is not even approved yet.
Lots of growth levers here, the stock is going down but totally not depleted, so this is the one I’m sticking with even though the market has sort of sold it.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.