Should you buy LMND? This video goes through a complete analysis of Lemonade ($LMND) stock, to understand how it will attempt to disrupt the insurance industry, and how much value it could be worth in the long-run!
The stock went public on July 2nd, 2020 at a price of $29 per share, but skyrocketed to over $69 on its first day alone, to set a record for the highest gain of any American 2020 IPO.
Lemonde is a relatively young company, having only been established in 2015, within the insurance space (specifically the Property & Casualty segment), looking to use a cominbation of artificial intelligence, behavioral economics and big data to automate both the underwriting and claims processes that have historical required hundreds if not thousands of employees. Lemonade in fact, is attempting to do all of this with four artificial entities including two chatbots - AI Maya, AI Jim, CX.AI and Forensic Graph.
Insurance is an extremely broad industry with many sub segments, and according to the Insurance Information Institute, companies in the US alone wrote more than 1.2 trillion in policies in 2018 with a roughly even split between Property and Life. While it is competing directly with companies such as State Farm and Allstate, it is in fact very different in its approach to these legacy and established players.
Lemonade is also looking to expand its operations overseas to capitalise on the global markets, and has already done so in Germany and the Netherlands for example. The assumption is that once it has saturated its currently targeted segments in both the US and the aforementioned European countries, it will expand its offerings to include other areas such as business, travel and car insurance for example, and potentially even health & life insurance in the long-run.
In this video, we also take a look at its Income Statements from the last couple of years, its Balance Sheet and also take a quick glance at its Financial Ratios, to understand its current valuation and if there is currently a suitable entry point to BUY the stock.
We also touch on a few other topics - such as its $300 million backing from Japan's Softbank as part of the Vision Fund, the emergence of AI as a force not to be reckoned with and also a rising, fellow disruptor in Hippo, founded by Assaf Wand, and the downgrade of Lemonade by Goldman Sachs analyst Heath Terry on Monday July 27th, when he initiated coverage on Lemonade and immediately issued a Sell rating. His reasons for the Sell rating were related to the astronomical valuation concerns as covered in this video, and he expects about five years of operating losses before breaking even plus the company's probable need for a significant injection of additional capital in the future in order to stay afloat.
While most might immediately conclude that Lemonade and Hippo will jockey for position in the specific niche they find themselves, and diminish each other's prospects, it is important to realise that they are both out to DISRUPT the legacy trillion dollar insurance market with all of its aging players. The insurance industry is so large, that there is more than enough room for two or even multiple significant players, such as what is already happening now today, and it wouldn't be surprising to see both disruptors thriving over the next decade.
Ultimately, this video aims to provide greater detail surrounding the fundamentals of Lemonade (LMND) and whether or not the stock is worthy of a BUY given it has already run up so much since its IPO.
0:41 Lemonade goes public
1:26 What does Lemonade do?
3:34 90 seconds to register, 3 minutes to get paid
4:24 A look at the Lemonade phone app
5:57 The Customer Cortex
7:03 The Total Addressable Market of the Insurance industry
7:55 The size of the Property & Casualty market in the US is rising
8:30 The US accounts for less than 50 percent of global P&C premiums
9:26 Lemonade's Income Statements for 2018 and 2019
10:18 Lemonade's Income Statement for Q1 2020
10:47 Lemonade's Balance Sheet
11:14 Lemonade's Financial Ratios
12:08 State Farm attacks Lemonade
12:48 Lemonade's declining Loss Ratio
15:09 Humans can no longer compete with Chess AIs
16:07 Hippo vs Lemonade
17:50 Final thoughts on LMND stock
18:31 Softbank as a backer to Lemonade
19:01 A look at the LMND price chart
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