Why Lemonade Stock Was Turning Sour Today

Shares of Lemonade (NYSE: LMND) were leaving a bitter taste in investors' mouths today after the "insurtech" company posted another disappointing quarterly earnings report, with slowing growth and a wide loss.

As a result, the stock was down 15.9% as of 11:15 a.m. ET.

Image source: Lemonade.

Lemonade is still getting squeezed

Following its pandemic-era boom and bust, Lemonade stock has struggled to convince investors it can build a viable business, and last night's report seemed to add to the skepticism.

Its in-force premium, a measure of the size of the business, rose just 22% in the quarter to $839 million, driven by a 14% increase in customers and 8% in premium per customer. Revenue in the quarter was up 16.6% to $122 million, which essentially matched estimates at $121.8 million.

The company did show improvement in its gross loss ratio, essentially money paid out in claims divided by money received in premiums, which fell from 94% to 79%, but the business still seems to be far from profitability, as its adjusted earnings before interest, taxes, depreciation, and amortization ( EBITDA ) loss narrowed from $52.7 million to $43 million. On the bottom line, it reported a per-share loss of $0.81, an improvement from a per-share loss of $0.97 in the quarter a year ago, and ahead of the consensus at an $0.88 per-share loss.

Despite the sell-off, management called the results "excellent," noting robust top-line growth and relative stability in expenses.

Can Lemonade turn it around?

Lemonade's guidance wasn't particularly inspiring, as the company expects 22% growth in in-force premium to $875 million to $879 million and 10% growth in revenue to $124 million to $126 million, well below the consensus at $134.3 million. It also sees its adjusted EBITDA loss widening from the second quarter to $56 million to $58 million in the third quarter.

With its growth fizzling and losses still significant, the buy case for Lemonade has significantly narrowed.

Jeremy Bowman has positions in Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy .