Short Selling

Short Selling Report: Lemonade Inc (LMND:US)

A man is holding a mobile phone showing a screen of the Lemonade Inc app which is using
Lemonade Inc
(LMND:US)
12 months:
+33%
Activity:
Bearish
Pattern:
High short interest
News:
Acquisition of Metromile
Lemonade Inc
(LMND:US)
12 months:
+33%
Activity:
Bearish
Pattern:
High short interest
News:
Acquisition of Metromile

Monitoring short selling data can help active investors avoid losses. Short sellers tend to do their research. If they’re shorting a stock, there’s usually a good reason they are doing so.

In this report, we are going to analyze the short selling data on Lemonade Inc (LMND:US). Lemonade is an American insurance company that offers renters, homeowners, car, pet, and life insurance. At present, the group operates in the US, Germany, France, and the Netherlands, however, it is continuing to expand globally. It is listed on the New York Stock Exchange and currently has a market capitalization of $1.95 billion.

Lemonade Inc: Short Selling Activity

Looking at the short selling data on Lemonade, we see several red flags.

The first is that short interest is very high. Our data shows that at present, 14.9 million LMND shares are on loan. That represents approximately 39% of the free float. This signals that many institutions are bearish on the stock.

The second is that short interest has risen significantly recently. Over the last three months, the number of shares on loan has jumped 30%. This tells us that shorters are ramping up their downside bets here.

The third red flag is that utilization has climbed from 80.0% to 92.4% over the last three months. This indicates that demand for the stock from the short sellers is very high right now.

Different short selling measures are depicted in this diagram, which gives shorting statistics.

No Profits and a High Valuation

In terms of why shorter sellers are targeting Lemonade, it is most likely related to the fact that the company is unprofitable and trades at a high valuation.

Looking at analysts’ forecasts, Lemonade is not expected to turn a profit anytime soon. For 2021, analysts expect the group to post a net loss of $240 million. For 2022, they expect a net loss of $287 million.

Meanwhile, the valuation on the stock remains relatively high despite the fact the share price has fallen significantly over the last 12 months. At present, the consensus forecast for 2022 revenue is $219 million. That means the forward-looking price-to-sales ratio is 8.9.

It’s worth noting that the short sellers have had success with Lemonade stock before. Back in May, we highlighted the fact that Muddy Waters was shorting the stock. Since that report, the stock has fallen around 60%.

Given that short interest has risen here recently, we think caution is warranted towards the stock. The high level of short interest suggests that the short sellers see further downside on the horizon.

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