The S&P 500 is hovering around its all-time high as we head into March, but that doesn’t mean that all stocks have become expensive. There are some excellent opportunities for risk-tolerant long-term investors, especially in the financial technology, or fintech, industry. Here are two companies, in particular, that look like incredible buys as winter comes to a close.
A true disruptor with strong results
Lemonade (NYSE: LMND) is an insurance company that aims to disrupt the traditional model by using technology to alleviate consumer pain points. For example, claims can be processed in seconds instead of days in many cases and getting (and accepting) insurance quotes is a seamless process.
In the fourth quarter, Lemonade reported surprisingly strong results. It surpassed the high end of its guidance range for revenue, in-force premium, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The latter showed that losses are narrowing rather quickly.
Management said it expects to be cash-flow positive during 2025 and that the business will achieve adjusted EBITDA profitability in 2026. With nearly $1 billion in cash and investments, the company has plenty of runway to get there.
Not only did all of these metrics look great, but the company’s loss ratio came in at 77% — a big improvement over the 89% figure from the fourth quarter of 2022 and just above its 75% long-term target. (To be fair, the fourth quarter is seasonally strong for insurance profitability.)
Despite the generally stellar results from the business, Lemonade’s stock went down by more than 20% after the report. Not only did management’s revenue guidance come in a little weaker than investors were hoping for in 2024, but the company said it’s returning to growth mode in 2024 and increased growth expenses could put pressure on profitability.
Even so, the company’s numbers are all heading in the right direction. If management can keep the business growing and deliver on its profit targets, it could be a massive win for patient investors.
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A deep-value fintech…
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