Lemonade Stock Promises To Deliver Juicy Profits For Investors

6 mins read
Lemonade Stock Promises To Deliver Juicy Profits For Investors

Before I get into the details of the opportunity in Lemonade (NYSE:LMND), I want to talk about the entire market. LMND stock has a bright future, but  there’s a lot of extrinsic risk because, astonishingly, Wall Street is thriving while Main Street is struggling.

Source: Stephanie L Sanchez / Shutterstock.com

Mom-and-pop businesses are dying while larger corporations are booming. I don’t just mean Amazon (NASDAQ:AMZN) or Zoom (NASDAQ:ZM); all indices have been breaking records for months. Bulls are only selling company A to buy company B. Small caps made new highs and tech stocks fell as bears went on vacation in a year where they could have had their way.

For LMND stock in particular, the price range has been tightening so a move is coming. If a dip materializes it would make for a good entry opportunity.

I don’t condone having blind faith in the fact that stocks will continue rallying this year. There are plenty of reasons to be cautious, but absolutely no reason to be shackled by fear.

The safety net from central banks around the world has never been stronger. Leaders have no option but stay committed to reflating our economies. They opted to shut the world down and break it last March, so this is the price they pay.

The current conditions will remain favorable to real estate transactions for months if not years. There’s absolutely no way that the governments can afford to let interest rise again anytime soon. If we get an equity correction, the bulls will buy the dips.

LMND Stock Has a Bright Future Ahead

Lemonade (LMND) Stock Chart Showing Tightening Range

Source: Charts by TradingView

Needing insurance is nothing new, but it is time for fresh ideas and that’s where Lemonade comes in. In my previous write up from mid-December my call was to buy and it delivered 60% gains. But that doesn’t mean that the upside potential is over.

While I like the perfect timing that I had last month, I don’t dislike LMND stock here either. Nothing has changed but the entry level. The range is tightening so there will be a move soon, which could be lower. And this is still a stock to own for the long haul.

The days of doing insurance the old fashioned way are numbered and LMND stock is the best play on the future. The market is obviously massive so there is no need to offer the proof of its addressable size or viability. Big legacy competitors will have to adjust and adapt. Much like Tesla (NASDAQ:TSLA) disrupted how the auto industry does business, Lemonade will cause ripples. I don’t mean by the EV type change but rather how they produce and market their product. LMND is not reinventing insurance offerings per se but more so how they tailor and automate it to fit individual customers.

The Market Demands Providers Evolve

Young people have different demands; take my own 19-year old son. He wouldn’t even entertain going into an office to buy a policy. I could probably bribe him into making a call, but it would take weeks to get done. But if I point to an app he’d get it done in a blink. The company website says “Instant Everything” and that’s what it will take.

Lemonade is hitting on all the buzz-themes of the future. It’s quick, automated and makes use of super smart code to better serve the client and the company. How can you not believe it would have a rosy future given all this potential? It would take an extremely bad string of luck to fail. Management would have to commit one flub after the other. Or the market environment would have to drastically veer off course and neither of those scenarios are likely.

My assumptions remains that the smartest course of action here is to hold LMND stock for at least another 12 months. By then we’ll have a better idea of its true potential. Meanwhile those who are versed in options can sell covered calls. A stock owner can sell a July covered calls and collect premiums while they wait.

On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Nicolas Chahine is the managing director of SellSpreads.com.