What happened
This video will talk about the recent stock price surge from Lemonade (LMND +0.16%). The stock is up 75% this past month. Surprisingly, there isn't any company-related news behind this month's move. But some might say it has to do with the recent short-squeeze action. Lemonade had been one of the most beaten-down stocks in the market since the start of the year. The stock was down 65% from its highs. A mix of short-seller reports and a negative reaction to Lemonade's first-quarter earnings report sent the stock plummeting. As of today, the stock is still down roughly 40% since its all-time high.
Squeezed
We've seen quite a bit of short-squeeze action regarding the so-called meme stocks, which are generally correlated to heavily shorted companies. And Lemonade certainly qualifies. As of today, nearly 20% of Lemonade's float is sold short, which is down from 30% since May. So one can assume that much of Lemonade's recent price action could be the result of short-squeeze pressure.
What's next?
Just as with the short squeeze that happened earlier this year, we might see these meme stocks plummet again, and that might hurt a stock like Lemonade, which has been dragged along in this rally. Especially since there has been no news regarding the company that might justify a 75% rise in stock price. Waiting on the sidelines until things calm down might be the best move in the current market.
Watch the video below for the full insights.
*Stock prices used were the closing prices of June 9, 2021. The video was published on June 10, 2021.
