We are at it again with our next pick for a potential short squeeze: $LMND
For those who don’t know or very little about this company as well as how we do our research beyond financial analyses, here is a quick summary
- Lemonade is an insurance company that provides all kids of insurance products like car, rental, home owners, pets and etc.
- One unique thing about them is they have no human processing claims. Yes, you heard that correctly. They use AI and chatbots to do that. (Now you are probably thinking why this stock wasn’t an AI play…)
- Founders have no insurance background so you can pretty much assume that they were thinking a lot outside the box which is why people love this company
- They got investment from amazing companies including Softbank, Sequoia Capital among others.
- And their financials are heading into the right direction as you can see below
Now you are thinking…what’s wrong with this company that there is a short interest of 31.57% and how did a stock trading as high as $163 came down to this level?
We think it’s a poor execution. But this can be fixed and is being fixed. They are attracting young customers. Their cost is going to be less using AI/chatbots, their products are consistently rated as one of the best out there, and they only have 69.92m shares outstanding with 31.57% short interest. And did I not mention that insurance premiums are up this year by a mile? Look at Geico’s earning from $BRK.A over the weekend.
Because of all this, we took a massive call options position in $LMND and as I am writing this, it’s up 7% and they are reporting earnings tomorrow. Let the short squeeze begin!
Btw, do your own DD before you make any investment decisions.