The pandemic forced many people into their homes and online in 2020, and investors responded by flocking to technology stocks that they believed could excel during this difficult time…
And tech IPOs were no exception. Many of the biggest IPOs this year were in the tech sector, but some investors may be wondering if these new publicly traded companies are worth investing in for 2021. To help you find a handful of tech stocks that could be worth purchasing in the new year, we asked a few Motley Fool contributors for their top tech IPOs. They came back with Lemonade (NYSE:LMND), nCino (NASDAQ:NCNO), and Airbnb (NASDAQ:ABNB).
Lemonade: A new approach to an old industry
Brian Withers (Lemonade): Lemonade went public on July 2, 2020 with a goal to be the “world’s most loved insurance company.” That may seem like a pipe dream, but once you learn how the company operates, it may not seem so far-fetched after all.
This start-up is taking a whole new approach to providing renters, home, and pet insurance. It’s built on a “digital substrate,” meaning that any task that can be automated by artificial intelligence, chatbots, or mobile technology is automated. You might think this would create a lousy customer experience, but it doesn’t. Potential customers can get insurance quotes in an average of 90 seconds, policyholders can easily file claims with their mobile devices, and almost a third of claims get paid instantly. But there’s even more to like about this disruptive tech company.
Lemonade is a public-benefit corporation, meaning that it is legally required to consider all stakeholders in the decision-making process. Given its status, the company has chosen not to profit when it has money left over after claims have been filed. Any proceeds not spent on claims at the end of the year are donated to a charity chosen by the policyholders. So far in 2020, the company has donated over $1 million to charitable causes selected by its customers.
How’s this model working? The company is attracting customers at a high rate, many of whom have never owned insurance before. Last quarter, the company grew its customer base by 67% year over year to reach over 941,000. Customers are also paying 19% more on average year over year for policy coverage. Add these two growth rates together and its overall in force premiums (the amount policyholders are paying in aggregate annually) grew 99% year over year to $189 million. Its all-important gross loss ratio (the amounts paid out for claims over the total premiums collected) improved from 78% in the third quarter of 2019 to 72% in Q3 2020.
There’s a lot to be excited about with this upstart, but it comes with some risk. Its 61 price-to-sales is valued more like hypergrowth phenom Zoom Video Communications (56 P/S) than its insurance provider peers such as Allstate (0.8 P/S). But with property, casualty, and life insurance premiums at around $5 trillion globally, this disruptive challenger has plenty of room to grow. Those investors looking to take part in…
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