By Dhirendra Tripathi
Investing.com – Root (NASDAQ:ROOT) shares jumped 17% on Friday following a strong recommendation from Citron Research's Andrew Left.
He called the insurance company a long pick. The company raised $724 million in its October IPO at an issue price of $27, but stock is trading 44% lower than that.
Left pointed out that Root is the most heavily shorted stock with a market cap above $1 billion in North America, giving reasons why this is unjustified. Citron notes that five months ago, Silver Lake and early Snowflake Inc (NYSE:SNOW) investor Dragoneer, each invested $250 million in Root, at more than double the IPO price.
He said the company has the potential to get 2% of the insurance market, has a strong shareholder list and enough cash for two years.
“If they get 2% of the $266 billion US auto insurance market then just the insurance side is worth 10x. While these valuation metrics may be considered "Voodoo math", Citron said there is no reason this stock is worth less than its IPO price of $27.