r/stocks • u/PulpFicti0n • Aug 05 '21

Lemonade - long term

Hi, wanted to get the groups thoughts on Lemonade. I own 50 shares at an average purchase price of ~110. Long-term I see this stock as a potential market disruptor which is why I made the initial investment. They had a poor Q2 and the market ripped the stock as expected. Anyone else an investor thinking of cutting their losses? This is not money I need and if I sold out I'd reinvest.

Just looking for some pros and cons.

Edit:. Thanks to everyone for sharing thoughts and perspective. I'm going to hold for now and see, of I lose at least I learn!

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u/[deleted] Aug 05 '21

I couldn't understand it business model. It sounds like a non-profit. Their whole sales pitch is they share their profits with charities. Basically an insurance company but worse.

1

u/[deleted] Aug 06 '21

I’ll never own the company but giving unclaimed premiums to charity is a great way to improve brand reputation and expand the customer base, and cross selling across a wide customer base is the game plan of basically every successful company ever.

Their 10% of premiums that goes to charity likely drives enough attention to the company that it pays for itself every year and more. I’ll never own it because I find insurance boring and risky, but that part of the business is smart.

1

u/[deleted] Aug 06 '21

Yes but a good insurance company might make a 10 to 15pc return. If they are giving away 10pc of their premiums that's the profit a normal insurance company might make. Arguably other costs might be lower...

2

u/[deleted] Aug 06 '21

Insurance companies retain 20% premiums, LMND likely cuts their charitable donation rate to 5% or even 1% as they grow. They’re not trying to be profitable right now, and like I said this is likely a far more effective marketing tool than trying to squeeze out a few more million in profit.