Lemonade Stock Should Be Your Main Squeeze This Summer

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Insurance companies have been around for as long as we can remember, but the lack of innovation has made this industry ripe for disruption. Enter Lemonade (NYSE:LMND), the “insurtech” startup that hopes to make insurance cool again. Fresh off its Initial Public Offering (IPO) in July, Lemonade stock rallied 138% and pushed the company’s market valuation to $3 billion.

The Lemonade (<a href=LMND) website is displayed on a smartphone screen." width="300" height="169">

Source: Piotr Swat / Shutterstock.com

The company hopes to make some serious headway in the otherwise mundane insurance industry with two superpowers: innovation and millennials.

In addition to a savvy new app that comes with a pink colorway, Lemonade aims to make the process of buying insurance more accessible and easy through a subscription service. The company’s new take on the insurance industry makes LMND stock a worthy investment for the long-haul.

A High-Tech Platform Is a Win For Lemonade Stock

While Lemonade’s core product is insurance, the company stands out from a sea of competitors thanks to its high-tech app. The app hopes to make insurance more appealing to a younger generation. Nearly 70% of the app’s users are below the age of 35.

The process of buying insurance is often perceived as a tedious process, but Lemonade hopes to change the narrative on this. The company’s user and visually-friendly app boast an insurance subscription service that offers products starting as low as $5.

With a focus on the subscription-based service, Lemonade has the ability to offload 75% of the risk associated with a purchase to reinsurers while limiting its exposure to 25%. This creates a steady revenue stream which lowers volatility and increases stability in the long-term.

But Lemonade’s big play on tech isn’t just limited to its subscription platform. The company also created its AI helpdesk, aka Maya and Jim, to guide customers through the insurance purchase. Maya has the ability to set up buyers with the insurance of their choice in two minutes, while Jim can pay out claims in three seconds. The speed and efficacy of Lemonade’s app is unmatched by any of its insurance predecessors.

Marketing to Millennials

Dubbed as the ‘right now’ generation, millennials are often defined by their lack of patience and need for immediate results. Lemonade’s savvy app plays perfectly into desire by offering just that: instant access to the best insurance for your needs (at incredible prices). The speed, accessibility, and price point have made Lemonade a game-changer for this generation.

Getting millennials to jump on a trend in an industry as traditional as insurance is by no means an easy feat. However, Lemonade hopes to lure in the crowd with insurance premiums that are significantly lower than its competitors, while also tapping into new insurance markets like casualty, life, and global property. More recently, the company launched an insurance vertical for pets.

To top things off, Lemonade’s app will also donate unclaimed money to a charity of your choice. This is a total win-win for millennials, who get the best value for their money while supporting a good cause!

A Brand Built on Trust

The insurance industry is often perceived as untrustworthy, but Lemonade hopes to fix this costly problem with total transparency. In an interview with CNBC’s Jim Cramer, Lemonade’s CEO said that the customer will have full visibility on where every cent of their money is going.

“You pay me a buck, I tell you in advance that I’m going to keep 25 cents on the dollar and if there’s money left over after paying claims, I’m going to give it to a charity of your choosing,” said Lemonade’s CEO, Daniel Schreiber.

The company is confident in its ability to weather what may come their way thanks to its resilient business model and altruism that differentiates the brand from other insurance providers. Although net losses are surging, with losses recorded at $21.6 million in the first quarter of 2020, the company believes that its investments will pay off ten-fold in the coming years.

With a business model that’s attractive to young investors and an app that makes the process of buying insurance easier than ever, Lemonade stock is worth buying into for long-term gains. However, as with any startup, the investment does have its risks. Invest wisely and don’t expect instant results.

Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks. 

The post Lemonade Stock Should Be Your Main Squeeze This Summer appeared first on InvestorPlace.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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