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Lemonade Falls 8% As Credit Suisse, Goldman Sachs Say ‘Sell’

Shares of online insurance platform Lemonade (LMND) fell 8.2% on Thursday after Credit Suisse initiated coverage of the stock with a bearish sentiment and Goldman Sachs reiterated a Sell rating.

Credit Suisse analyst Michael Zaremski initiated coverage of Lemonade with a Sell rating and a price target of $56 (downside potential of 10%). In a research note to investors, the analyst stated that a Credit Suisse survey indicated that satisfaction rates were “materially lower” for Lemonade compared to the peer average in key metrics such as claims and application processes. The company in particular lagged its direct-to-consumer competitor Progressive (PGR).

Zaremski also feels that Lemonade’s valuation is high. He believes that it needs “expense ratio improvement” and must lower its acquisition cost ratio and improve its customer retention rates, particularly among young people, to attain lasting profitability.

Also, Goldman Sachs analyst Heath Terry, the lead underwriter of Lemonade’s IPO, reiterated a Sell rating with a price target of $44. In a research note to investors, the analyst acknowledged that Lemonade is disrupting the property and casualty insurance business with its use of artificial intelligence.

However, he stated that “with 140% year-over-year gross earned premium growth in the most recent quarter, about five years of expected operating losses before reaching break-even, and significant capital needs beyond the most recent IPO, LMND is essentially venture investing in the public markets.” (See LMND stock analysis on TipRanks)

Overall, the Street’s Hold consensus for Lemonade is based on 1 Buy, 4 Holds and 2 Sells. The average analyst price target of $67 indicates an upside potential of 7.4% over the coming months.

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Sirisha Bhogaraju
Sirisha Bhogaraju is a financial content writer at TipRanks, where she works on stock analysis, earnings reviews, key updates, and comparison pieces on companies across several sectors, including technology, consumer, healthcare, energy, and industrials. She covers stocks trading on the NYSE and NASDAQ. Sirisha also writes for InvestorPlace on behalf of TipRanks. After working at HDFC bank, one of India’s leading private sector banks for three years, Sirisha started her career as a financial content writer with a Bengaluru, India-based start-up in 2006. Prior to joining TipRanks in August 2020, Sirisha worked as a Research Analyst and a Team Leader of the Consumer Sector team at Market Realist, where she wrote in-depth research articles focused on consumer staples and discretionary stocks. Sirisha has a Master’s degree in Finance and holds a Bachelor’s degree in Mathematics and Statistics. She has completed CFA level II.

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