Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Position Status | Return(%)* |
|---|---|---|---|---|---|---|---|---|
| 11 Aug, 25 | LMND | Buy | USD 48.98 | USD 52.0 | USD 55.0 | 1 day | Closed |
14.33%
|
*Return(%) represent the percentage change between the entry price and exit price of the recommendation.
Data Powered by EOD Historical Data (“EODHD”).
Lemonade, Inc. provides various insurance products in the United States and Europe. Its insurance products include stolen or damaged property, and personal liability that protects its customers if they are responsible for an accident or damage to another person or their property. The company also offers renters, homeowners, car, pet, and life insurance products, as well as landlord insurance policies. In addition, it operates as an agent for other insurance companies. The company was formerly known as Lemonade Group, Inc. and changed its name to Lemonade, Inc. Lemonade, Inc. was incorporated in 2015 and is headquartered in New York, New York.
Strong Free Cash Flow Improvement: Adjusted free cash flow rose by USD 22.6 million, moving from USD 2.4 million in Q2 FY24 to USD 25.0 million in Q2 FY25, supported by higher operational efficiency and disciplined cash management
Significant Gross Profit Expansion: Gross profit surged by USD 33.5 million, increasing from USD 30.8 million to USD 64.3 million, representing a 109% year-over-year improvement, driven by higher revenue and improved loss ratios
Decline in Customer Retention Levels: Annual Dollar Retention dropped by 4 percentage points, from 88% to 84%, due to the non-renewal of certain policies that failed to meet underwriting criteria
Sharp Increase in Growth Spend: Growth-related sales and marketing expenses nearly doubled, rising by USD 23.9 million from USD 25.8 million to USD 49.7 million (+93%), reflecting aggressive expansion efforts
Lemonade’s ability to achieve sustained profitability may be constrained by elevated growth-related expenses and competitive pressures in the digital insurance market, which could offset gains from improved loss ratios and revenue growth
| Entry Price | Support* | Target 1** | Target 2** |
|---|---|---|---|
| 48.98 | 45.0 | 52.0 | 55.0 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
**Target prices may vary by ±0.5% depending on market volatility.
Strong Quarterly Performance and Growth Acceleration: In the second quarter of fiscal year 2025, Lemonade Inc. demonstrated notable financial and operational progress, marked by robust growth in key performance metrics. In Force Premium (IFP) rose by 29% year-over-year to USD 1.083 billion, representing the seventh consecutive quarter of growth acceleration. Revenue reached USD 164.1 million, an increase of 35% compared to the prior year, driven by higher gross earned premium, ceding commission income, and net investment income. The trailing twelve-month gross loss ratio improved to 70%, with the quarterly gross loss ratio at 67%, reflecting a 12-point year-over-year enhancement.
Profitability Improvements and Margin Expansion: The company’s gross profit surged 109% year-over-year to USD 64.3 million, supported by a 14-point expansion in gross margin to 39%. Adjusted gross profit also advanced significantly, increasing 96% to USD 65.6 million. These improvements were largely attributable to revenue growth and a 10-point improvement in the net loss ratio. Adjusted EBITDA loss narrowed to USD 40.9 million, a 5% improvement over the previous year, while net loss declined by 23% to USD 43.9 million.
Operational Discipline and Expense Management: Total operating expenses, excluding loss and loss adjustment expenses, increased by 21% to USD 129.2 million, primarily due to a 93% increase in growth spend, consistent with the company’s accelerated expansion strategy. Growth spend rose to USD 49.7 million from USD 25.8 million in Q2 2024. However, excluding growth-related investments, operating expenses fell by 2% year-over-year, supported by efficiency initiatives and a one-time USD 11.7 million tax refund under the Employee Retention Credit program.
Segment Highlights – Car and Europe: The Car insurance segment delivered 12% sequential IFP growth, outpacing the overall business for a second consecutive quarter. Conversion rates improved by approximately 60% due to the integration of telematics insights earlier in the customer lifecycle. The segment’s gross loss ratio improved to 82%, its best performance since launch. In Europe, IFP exceeded USD 43 million, growing over 200% year-over-year and contributing more than 20% of net new customers. The European business also achieved a gross loss ratio in the low 80s, marking a 15-point improvement year-over-year.
Reinsurance Program Optimization: Lemonade renewed its reinsurance program for the year beginning July 1, 2025, with terms largely consistent with the prior year, except for a reduction in quota share cession from 55% to 20%. This strategic adjustment allows the company to retain more premium and gross profit while maintaining capital adequacy. The transition will occur gradually over several quarters, with revenue growth expected to outpace IFP growth during this period due to increased revenue retention.
Cash Flow and Liquidity Strength: The company generated USD 25 million in adjusted free cash flow during Q2 2025, a USD 23 million improvement from the prior year. Cash flow from operations reached USD 6 million, up USD 17 million year-over-year. Lemonade ended the quarter with approximately USD 1.03 billion in cash, cash equivalents, and investments, of which USD 277 million was held as regulatory surplus within its insurance subsidiaries.
Outlook and Strategic Priorities: For the full year 2025, Lemonade raised guidance for IFP, gross earned premium, and revenue while reiterating its adjusted EBITDA guidance. Management reaffirmed expectations of positive adjusted free cash flow for the year and anticipates achieving positive adjusted EBITDA before the end of fiscal year 2026. Strategic priorities remain focused on driving sustainable growth through AI-driven underwriting, expansion in high-potential segments like Car and Europe, and disciplined expense management.
As per the above-mentioned price action, recent key business and financial updates, momentum in the stock over the last month, and technical indicators analysis, a ‘Buy’ rating has been given to Lemonade, Inc. (NYSE: LMND) at the closing market price of USD 48.98, as of August 08, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Financial Services Industry: Insurance - Property & Casualty
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) |
|---|---|---|---|---|---|---|---|
| LMND Lemonade Inc |
-1.21 1.49% | 80.15 | - | - | 2.98 | 1.62 | 2.45 |
| PGR Progressive Corp |
-4.92 2.12% | 226.89 | 34.22 | 20.33 | 1.55 | 5.46 | 1.70 |
| CB Chubb Ltd |
1.89 0.61% | 312.93 | 12.92 | 10.49 | 1.85 | 1.73 | 2.18 |
| ALL The Allstate Corporation |
-1.1 0.53% | 208.41 | 12.61 | 10.79 | 0.83 | 2.79 | 0.99 |
| TKOMF Tokio Marine Holdings Inc. |
- -% | 39.42 | 14.81 | 10.00 | 0.0069 | 1.59 | 0.0064 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risk: This report may be looked at from a high-risk perspective and a recommendation is provided for a short duration. This report is solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance level is August 08, 2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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