1 Growth Stock Down 82% Soaring This Month – And There’s Still Time To Buy

technology driven Nasdaq 100 has returned nearly 11% in the past month alone, as investors search for bargains after a tumultuous first half of 2022. However, the index remains in bearish territory for the time being.

But parts of Lemonade (LMND 6.11%) have rebounded 46% in the past 30 days, more than quadrupling the return of the Nasdaq 100. August , has contributed to its recent strength.

The lemonade stock has fallen more than 90% from its all-time high a year ago and remains at 82% of that peak even after the recent surge. But the company may have turned a corner, which could mean a major upside for investors.

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Lemonade is highly (artificially) intelligent

Lemonade is a real disruptor, and it’s taking on an insurance industry dominated by entrenched players and traditional underwriting models. The company uses advanced technologies such as AI and machine learning to create better insurance products and improve the customer experience.

When consumers visit the Lemonade website, they have the option to interact with Maya, an AI-powered web bot. He can write insurance quotes in less than 90 seconds, and for existing customers, he can process and pay claims in three minutes or less. This is revolutionary for anyone who has spent time going through the lengthy claims process of traditional insurers.

When it comes to premium pricing, Lemonade relies on mountains of data to power its AI models. In the second quarter, it released its sixth-generation lifetime value model (LTV6), which is its most advanced predictive AI to date. It provides a lifetime value prediction for customers based on their likelihood of making a claim, moving to another insurer, or even purchasing additional products from the company.

LTV6 also detects inefficiencies across Lemonade’s business. The company currently operates in the renter, homeowner, pet, life and auto insurance markets. In the second quarter, the new model determined that many homeowners insurance policies in California would not be profitable despite previous evidence to the contrary. And on the other hand, it has highlighted a major opportunity in the pet insurance segment. This allowed Lemonade to make quick adjustments on the fly.

Ultimately, LVT6 is a major milestone in the company’s goal of achieving an average loss ratio below 75%, which is key to long-term profitability.

The lemonade path to profits

Lemonade is a money-losing company, and those losses have been significant. In 2021, it was in the red by $246 million, and another $142 million was spent in the first half of 2022.

But in a series of remarks in the second quarter, Lemonade told investors it would achieve profitability with the capital it has. This is a great benefit for shareholders as it means there will be no further dilution by raising more capital in the short term. The company expects its losses to peak in the (current) third quarter, before gradually heading into the black.

It will be accompanied by reduced costs and continued growth fueled by the investments made in recent years. In the second quarter, Lemonade’s in-force premiums jumped 54% year-over-year to $458 million. Its premium per customer also hit a record high of $290, thanks in part to increased cross-selling (customers buying multiple Lemonade policies).

The result was a huge 77% jump in its second-quarter revenue to $50 million.

There’s still time to buy Lemonade broth

Despite Lemonade shares rising 46% over the past month, there is still room for more upside, especially in the long run. Its customer base has grown 31% over the past 12 months to 1.58 million, but it’s only scratched the surface of its opportunity.

The company entered the auto insurance market last year and its progress was accelerated by the acquisition of MetroMile. Prior to the deal, the automotive segment made up 1% of Lemonade’s business, but immediately grew to 20% thanks to customers, state licensing and data provided by MetroMile.

There are approximately 198 million auto insurance policyholders in the United States and the industry could be worth over $316 billion in 2022 alone. This gives Lemonade plenty of avenues for growth and plenty of upside in its inventory.

The interesting part is that auto insurance is just one of five segments in Lemonade, with many more likely to be added in the future.