Root (ROOT) was the one IPO that caught my attention the most this week and I think it has potential moving forward.
As an online insurance provider, it looked similar to homeowners, renters, and pets insurer Lemonade (LMND).
Now, the overall market pulled back severely on Tuesday, the day of ROOT’s IPO.
That meant that Root didn’t have the context to skyrocket like Lemonade (LMND) did during its July debut.
And that’s despite the fact that Root was only being valued at a 6x multiple while LMND was valued at 10X — hence, a discount.
So the first day chart didn’t look as strong as I hoped, but I still think it showed some good signs of relative strength given the overall market was way down.
I want to share a little bit more about the company and then reveal under what conditions I’m looking to trade it.
Root is riding current digital trends that are taking everything paperless.
But among the 2,000 or so insurance technology startups out there, Root is the first one to reach unicorn status.
That doesn’t surprise me though.
Root has a clear and simple mission— to provide affordable car insurance to good drivers.
And the company’s product is truly unique and addresses the insurance market in an entirely new way.
The Root iPhone and Android app measures driving behavior— and the better the person drives, the more they are able to save.
Thanks to these smartphone sensors, drivers get a customized quote for their insurance.
According to Root’s website, drivers can generate cost savings of up to $900 per year, file claims in about 3 minutes, and accumulate Lyft credits.
Like just about every tech company that conducts its IPO these days, Root is not yet profitable and has $200M in debt.
However, the company has demonstrated huge revenue growth over the past several years. In the first six months of 2020, it reported $245M in revenue— as compared to $290M of revenue in the full year of 2019.
I’ll Trade Root as Soon as It Breaks All-Time Highs
On its IPO Tuesday, Root raised $663.7M, which gave it a total value of $6.7B.
The company sold shares in it’s Tuesday IPO at $27 each, which was above its target range.
I was hoping to get in on ROOT on Tuesday, but the chart didn’t show enough strength— in large part because the overall market was weak that day.
But the company has a large potential market cap and big addressable market— it’s already licensed in 36 states and active in 30.
The stock is currently trading at about $26 and I’ll look for it to more above $28 before I make an entry.
If you want to learn exactly how I trade Root, if it breaks all-time high, join my IPO Payday service.
I’m even offering a special quarterly price on IPO Payday now to teach traders how I’m crushing the IPO scene right now.
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