Root stock price has surged hard in the past few days, making it one of the best-performing companies in Wall Street. The stock made a major gap on Thursday and continued the rally on Friday, pushing it to its highest point since August 18th. It has soared by more than 405% from its lowest point in 2023, outperforming Lemonade (LMND), one of the most shorted stocks in the US.

Strong growth in the insurance industry

Root Inc is a leading technology company that is trying to change the insurance industry. It has created mobile applications that help people select the best insurance from the leading insurance companies in the US. 

It primarily focuses on auto, renters, and homeowners insurance segments, which account for a major part of the industry. In the US, it is estimated that the insurance industry in the US stood at over $422 billion in 2022.

Most importantly, the insurance sector has emerged as one of the most price-sensitive industries in the United States. It one of those sectors that has affected the country’s inflation as companies work to boost their margins. 

Root Inc’s stock price has surged in the past few days after the company published strong financial results. Its gross premiums jumped by 25% QoQ to $279 million. The premium rose by 129% on a year-on-year basis, signaling that the company is growing at a faster pace. 

Most importantly, the company is taking care of its cash burn as it slashed its net loss by 59% to $24 million. It also has a strong balance sheet with over $500 million in cash, meaning that it will not need to raise additional equity soon.

As a result, some analysts upgraded the company. For example, those at Cantor Fitzgerald moved the company to overweight and boosted the stock target to $13. This price is still much lower than the company’s current price.

Still, Root faces numerous risks ahead, including the rising competition in the industry. It competes with several insurtech companies and other traditional insurance companies. Also, the path towards profitability may take longer than expected. In his statement, the CEO said that its future profitability path will depend on its marketing spend.

Root stock price forecast

Root stock

The daily chart shows that the Root Inc stock price has made a strong bullish breakout in the past few days. As the chart above shows, the stock moved above the key resistance point at $14.80, the highest swing on December 5th and June 22nd last year.

The shares have moved above the 50-day and 100-day Exponential Moving Averages (EMA) as its volume soared. Data shows that the volume in the past two days surged to $3.5 million and $7.2 million, respectively. Before that, the average trading volume was averaging less than 100k per day.

Therefore, the outlook for the stock is bullish now that it remains above the ascending trendline shown in red. This uptrend could see it surge to the next psychological level of $20 in the coming days. 

However, in the near term, there is a likelihood that the stock will retest the key support at $14.80 in what is known as a break and retest pattern. In technical analysis, this pattern is one of the most popular continuation patterns in the market.

By Crispus Kanyaru

With a keen eye for market trends and a knack for translating complex financial concepts into engaging narratives, Crispus has established himself as a trusted voice in the world of finance. His work has graced the pages of esteemed publications like Benzinga, Forbes, Invezz, and Banklesstimes, reaching a diverse audience eager to navigate the ever-evolving financial landscape. Crispus's journey began with a deep curiosity about the forces shaping the global economy. This natural inquisitiveness led them to pursue a degree in finance and CPIA, equipping them with a solid foundation in financial theory and analysis. But Crispus knew that knowledge alone wasn't enough. He craved to bridge the gap between dry data and real-world experiences, to make finance accessible and relatable to everyone.

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