Root: 85% Down From IPO After Q3 Results, But Still Too Speculative
(Preview) Company Update (ROOT US) (Neutral)
Summary
Root's share price is now down 85% from its IPO. Its market capitalization is just $1bn, compared to net cash of $764m.
Q3 results and recent news have given little comfort to disillusioned investors. Growth was low and profitability did not improve.
New distribution with Carvana and independent agents risk taking away Root's telematics focus and increasing operational complexity.
2021 operating loss is expected to exceed $500m. Guidance implies the business will shrink in Q4, though a 2022 turning point is hinted.
Even at $4.10, we find Root shares to be too speculative, as we do not have confidence that performance and growth will improve. Avoid
Introduction: Why Is Root Stock Dropping?
Root, Inc. shares reached another record low on Tuesday (November 23), falling below $4 for the first time at one point and closing at $4.10, 85% below its IPO price of $27 in October 2020.
We downgraded our rating on Root to Neutral in May. At $4.10, Root's share price has more than halved since our…