What Happened?
Shares of digital insurance provider Lemonade (NYSE: LMND) jumped 22.2% in the morning session after it posted better-than-expected third-quarter financial results, signaling continued progress toward profitability.
The company reported revenue of $194.5 million, up 42.4% from the previous year and surpassing analysts' expectations by 4.8%. More importantly, its loss of $0.51 per share was 27.6% better than what experts had predicted. The strong results were driven by a 46.3% year-over-year increase in Net Premiums Earned, a key measure of core insurance operations. The company also demonstrated improving operational efficiency, with its pre-tax profit margin of negative 18.7% marking a significant 29.5 percentage point improvement compared to the same quarter last year. This combination of strong top-line growth and shrinking losses reassured investors about the company's path forward.
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What Is The Market Telling Us
Lemonade’s shares are extremely volatile and have had 68 moves greater than 5% over the last year. But moves this big are rare even for Lemonade and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 3.5% on the news that investors grew optimistic about its upcoming third-quarter earnings report, with sentiment also boosted by a broader market rally. The company was scheduled to report its results on November 5. Ahead of the announcement, reports indicated expectations for strong top-line growth. Estimates pointed to a potential revenue increase of between 35% and 38% compared to the same period in the previous year.
Lemonade is up 110% since the beginning of the year, and at $76.52 per share, has set a new 52-week high. Investors who bought $1,000 worth of Lemonade’s shares 5 years ago would now be looking at an investment worth $1,197.
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