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Lemonade cut at Oppenheimer following share price rally

Published 01/12/2023, 19:44
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Oppenheimer analysts downgraded Lemonade (LMND) to Perform from Outperform, removing its price target for the stock in a note Friday.

The firm told investors they are lowering the stock's rating due to its valuation and the return to normal weather in 2024.

"We are downgrading LMND to Perform from Outperform after the 67% increase in the share price from recent lows (10/27) vs. NASDAQ's +13%," explained the analysts at Oppenheimer.

"We believe this increase has been driven by a short squeeze (34% of float) following better 3Q results/4Q outlook, on less weather impact and initial rate increases driving gross margin improvement," they added.

Oppenheimer believes that while shares could test the recent July high at $24.08, the return to normal weather patterns in 2024 could pressure gross margins, particularly March-June storm season.

"We also note 2023 US total storm financial damages tracking 41% below 3-year avg. Lastly, LMND EV/gross profit now trading in line with Aug. levels and 145% above Nov. lows. Estimates remain unchanged," the analysts at Oppenheimer concluded.

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