Key Points
Lemonade reported its Q2 earnings results this morning and delivered better-than-expected sales.
Despite the sales beat, the company's forward guidance underwhelmed investors.
Rising oil prices and concerns about the Federal Reserve's next rate moves have investors feeling cautious.
Lemonade (NYSE: LMND) stock is getting crushed in Wednesday's trading. As of 12:35 p.m. ET, the company's share price had fallen 22.3%. Meanwhile, the S&P 500 was down 1%, and the Nasdaq Composite had fallen 1.1%.
Before the market opened this morning, Lemonade published its second-quarter results. Despite reporting earnings that were in line with the average analyst estimate and sales that beat the average analyst target, the stock is getting hit with a huge pullback due to softer-than-expected guidance and pressures impacting the broader market.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Image source: Getty Images.
Lemonade served strong sales growth, but it wasn't enough
In Q2, Lemonade posted a net loss of $0.56 per share on sales of $294.4 million. For comparison, the average analyst estimate had targeted a per-share loss of $0.56 on revenue of roughly $291 million. The company's revenue rose 79% compared to the prior-year quarter, and its gross earned premium rose 32% to reach approximately $332.4 million and beat the average analyst target by roughly $3 million. On the other hand, some key elements of guidance were disappointing.
Investors aren't happy with Lemonade's outlook
Lemonade's guidance for full-year revenue between $1.21 billion and $1.22 billion narrowly topped the average analyst target's call for sales of $1.21 billion, and its forecast for gross earned premium to be between $1.37 billion and $1.38 billion also topped the average target for gross earned premium of $1.37 billion. Unfortunately, the midpoint of the company's target for in-force premium to be between $1.632 billion and $1.639 billion fell significantly short of Wall Street's in-force premium target of more than $1.642 billion.
The company also reiterated its target for a non-GAAP (adjusted) operating loss of $50 million for the year, and many investors were seemingly hoping that the company would issue improved guidance. With the market on edge due to rising oil prices and policy announcements and commentary from the Federal Reserve's meeting today, Lemonade's Q2 report and forward guidance didn't deliver the big beat-and-raise quarter that investors saw as being necessary to support its growth-dependent valuation.
Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.