Shares of Lemonade (NYSE:LMND) had a difficult run this week. The insurtech stock slumped as much as 12% this week, though shares are down 10.7% as of 2:44 p.m. EDT Friday, with no apparent reason for the downturn.
There isn’t any company-specific news driving this week’s decline. Rather, it appears that general market malaise heading into the summer months could be a contributing factor. The broader market has been essentially flat this week, with the S&P 500 gaining roughly 1% this week (as of this writing), as some traders take off for the summer holidays.
It’s also likely that investors are exercising caution ahead of the release of Lemonade’s second-quarter financial results next month. In the first quarter, storms and a winter freeze in Texas left many without power and weighed on Lemonade’s financial results.
While revenue of $23.5 million was ahead of analysts’ consensus estimates, and in-force premiums surged 89% year over year, the company’s insurance business suffered a year’s worth of claims in just a few days. On a positive note, however, Lemonade’s operational system held up under the strain, processing the majority of claims within one week.
It’s important to remember, as a small-cap stock, Lemonade will be much more prone to big moves — both up and down. It’s been just one year since the company went public and the stock’s history of volatility is well documented. With a market cap of less than $6 billion, Lemonade will likely continue to be much more volatile than the broader market.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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