Why This Lemonade Analyst Is No Longer Bullish

Lemonade Inc LMND shares were climbing on Friday.

The rally in the stock from recent lows was driven by a short squeeze, following the company’s upbeat third-quarter results and fourth-quarter outlook, according to Oppenheimer.

The Lemonade Analyst: Jason Helfstein downgraded the rating for Lemonade from Outperform to Perform.

The Lemonade Thesis: The stock rose by 67% from its late October lows, versus Nasdaq’s gain of 13%, with a short squeeze of about 34% of float, “on less weather impact and initial rate increases driving gross margin improvement, Helfstein said in the downgrade note.

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“While shares could test the recent July high ($24.08), the return to normal weather patterns in 2024 could pressure gross margins, particularly March June storm season,” the analyst wrote. “We also note 2023 US total storm financial damages tracking 41% below 3-year avg,” he added.

“While sentiment has become more favorable to high-beta stocks ahead of potential interest rate cuts in '24, we believe investors will re-price the risk of storms to gross margins at some point,” Helfstein further stated.

LMND Price Action: Shares of Lemonade were up 1.24% to $17.90 at the time of publication Friday.

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