A young company has just made its debut on the stock market and is attracting the attention of millennials, but will they turn a profit?
Lemonade (NYSE: LMND) is a zesty new start-up based in New York that recently became a publicly-traded company and saw its stock price jump 138% on its opening day. The InsurTech business uses artificial intelligence to sell insurance cover to a younger customer base.
Is the company profitable?
The millennial-friendly company has seen a 266% increase in revenue since 2018. Just a couple of years ago its annual revenue was $22.5 million, now it has reached $82.5 million. While these figures are promising for the company that began its journey in April 2015, it is not yet in the green. In 2019 the company reported a loss of $108.5 million, a bigger loss than the $52.9 million the previous year.
Lemonade’s growth has been driven by a huge amount of spending by the company, with operating expenses topping $119.8 million in 2019. This isn’t unusual for a young company as they break into the market. However, it has contributed largely to its bigger loss.
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Lemonade targets young customers
The business lures its younger millennial customers with its artificial intelligence to help them make snappy decisions. Big players like Bank of America (NYSE: BAC) also have AI, utilizing virtual assistance. However, Lemonade’s AI technology allows its young users to apply for insurance cover in two minutes and can pay out insurance claims in just three seconds.
The numbers are showing they are on the right track, with 70% of customers under the age of 35. Lemonade has also doubled its customer base from 2018 to 2019 to more than 643,000 people. Only three months later in March 2020, it increased to 729,000. Global property, casualty, and life insurance is a $5 trillion market, and they are entering in a way that is extremely attractive for younger people. Lemonade is even offering premiums that are 50% cheaper than its competitors.
Should you invest in Lemonade?
Lemonade shouldn’t be underestimated as just another start-up and will likely be profitable in the medium term. It is focusing on marketing and attracting a large and young customer base, which could leave a sour taste in “competitors” mouths. The climate is very volatile at the moment as the world grapples with a pandemic. However, if you are willing to take the risk I would say invest! Just be prepared for a bumpy ride, a journey most start-ups take you on.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.