Metromile: Weaker Q2 And Lower Outlook Sent Shares Down 20% (Preview)

Company Update (MILE US) (Neutral)

Summary

• Q2 results saw Metromile's growth stalling and its losses widening as it struggled to cope with the fading of COVID-19 benefits.

• 2021 outlook was revised downwards significantly, with policies in force now expected to grow by just 8% year-on-year.

• We are concerned by the use of commission-based agents, the absence of reinsurance cover and the lack of growth at Metromile Enterprise.

• At $5.63, even after a 20% fall in after-market trading, shares are trading at 6.7x Premiums in Force, leaving a little margin of safety.

• Metromile's business model is now more unproven than before, and its valuation remains outside our parameters. Avoid.

Introduction: Why Is Metromile Stock Down?

Metromile Inc. released their Q2 2021 results after markets closed last night (Monday, August 9). Shares fell 19% to $5.63 in after-market trading.

We initiated a Neutral rating on Metromile stock in March 2021. Including the decline in aftermarket trading, shares have fallen 54% since, and MILE now trades at less…