Stock Analysis

US$107 - That's What Analysts Think Lemonade, Inc. (NYSE:LMND) Is Worth After These Results

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NYSE:LMND
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Shareholders in Lemonade, Inc. (NYSE:LMND) had a terrible week, as shares crashed 20% to US$103 in the week since its latest full-year results. The results look positive overall; while revenues of US$94m were in line with analyst predictions, statutory losses were 3.8% smaller than expected, with Lemonade losing US$3.63 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Lemonade

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NYSE:LMND Earnings and Revenue Growth March 4th 2021

Taking into account the latest results, the most recent consensus for Lemonade from five analysts is for revenues of US$113.1m in 2021 which, if met, would be a decent 20% increase on its sales over the past 12 months. Losses are supposed to decline, shrinking 13% from last year to US$3.17. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$112.0m and losses of US$2.98 per share in 2021. So it's pretty clear consensus is mixed on Lemonade after the new consensus numbers; while the analysts held their revenue numbers steady, they also administered a modest increase to per-share loss expectations.

Although the analysts are now forecasting higher losses, the average price target rose 24% to US$86.17, which could indicate that these losses are expected to be "one-off", or are not anticipated to have a longer-term impact on the business. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Lemonade, with the most bullish analyst valuing it at US$159 and the most bearish at US$56.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Lemonade's revenue growth will slow down substantially, with revenues to the end of 2021 expected to display 20% growth on an annualised basis. This is compared to a historical growth rate of 63% over the past three years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 3.2% annually. So it's pretty clear that, while Lemonade's revenue growth is expected to slow, it's still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Lemonade. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Lemonade. Long-term earnings power is much more important than next year's profits. We have forecasts for Lemonade going out to 2023, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Lemonade (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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