Root, Inc. (ROOT): A Bull Case Theory

We came across a bullish thesis on Root, Inc. (ROOT) on Value Investing Subreddit Page by Creative-Cranberry47. In this article, we will summarize the bulls’ thesis on ROOT. Root, Inc. (ROOT)'s share was trading at $147.42 as of May 9^th. ROOT’s trailing and forward P/E were 44.40 and 6.40 respectively according to Yahoo Finance.

Root Insurance (ROOT) delivered a breakout Q1 2025 earnings report that signaled a turning point for the company, showcasing substantial financial outperformance and strategic advancements that could reshape the auto insurance industry. The company exceeded expectations with $349.4 million in revenue—beating consensus by $42.6 million—and a staggering EPS of $1.15 compared to the expected $0.03, translating into $18.4 million in net income. Despite ramping up customer acquisition with a $51.5 million increase in marketing, Root maintained strong profitability and grew stockholder equity by $25 million, supported by $609.4 million in cash. Premiums also surged, with written premiums up 24% quarter-over-quarter to $410.8 million, and policies in force rose by 9.4% to 453,800—breaking a pattern of flat growth. The company’s operational efficiency was underscored by a best-in-class 56.1% gross loss ratio and improved LAE ratios, indicating a robust underwriting performance.

Root’s management provided confident commentary on its growth trajectory, noting pending regulatory approvals in key states like Michigan and New Jersey, setting the stage for nationwide expansion by 2026. The company now boasts over 20 partnerships—including Hyundai and Experian—more than doubling its partnership channel year-over-year, with embedded insurance playing a central role. Root’s tech-first approach enables rapid integration, superior pricing accuracy, and industry-leading operational efficiency, supported by its telematics-driven, AI-powered underwriting platform. The result is a potentially transformational business model with a path toward a 75% combined ratio, enabling profit-per-policy metrics far ahead of legacy peers. CEO Alex Timm and VP Jason Shapiro also emphasized the scalability of the agency channel, which is onboarding 13–14 agencies daily and could represent half the agency market within years—translating into millions of policies and billions in potential revenue.

Root’s long-term vision includes expansion into adjacent insurance verticals—home, pet, health, and life—leveraging its tech stack for cross-selling and customer retention. Meanwhile, a potential capital infusion from Carvana exercising Root warrants could inject up to $1.4 billion, significantly increasing book value and opening doors for strategic acquisitions. This capital, combined with Root’s technological edge and embedded ecosystem, positions the company for exponential growth. Root is emerging as the Progressive of the digital age, with a market disruption trajectory akin to Tesla’s in automotive. With a clean balance sheet, strong growth levers, and unmatched underwriting efficiency, Root presents a compelling investment opportunity with the potential for long-term returns exceeding 10X and a conceivable path to a $2,000+ share price.

Root, Inc. (ROOT) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held ROOT at the end of the fourth quarter which was 16 in the previous quarter. While we acknowledge the risk and potential of ROOT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ROOT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.