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Investing.com - BMO Capital raised its price target on Lemonade Inc . (NYSE:LMND) to $42.00 from $23.00 on Monday, while maintaining an Underperform rating on the insurance technology company’s stock. The company’s shares, currently trading at $57.37, have surged an impressive 239% over the past year, according to InvestingPro data.
The firm noted that Lemonade’s growth will likely require less capital compared to personal insurance peers due to its rating agency situation, as the company is rated by Demotech rather than A.M. Best since it has no public debt outstanding.
BMO Capital explained that this rating structure allows Lemonade to offset using less external reinsurance by leveraging a captive Cayman entity, providing the company with more financial flexibility.
Despite the significant price target increase, BMO maintained its Underperform rating, stating that the current stock price reflects a "best-case scenario" in which Lemonade can scale profitably in the highly-competitive auto insurance market.
The firm’s base-case scenario continues to be that Lemonade will not need a capital raise, though BMO believes a discount is warranted given the competitive challenges in the auto insurance sector.
In other recent news, Lemonade Inc. reported its second-quarter earnings for 2025, revealing a notable revenue increase. The company’s revenue reached $164 million, surpassing the expected $160.39 million. Although Lemonade posted a negative earnings per share (EPS) of -$0.60, it was better than the forecasted EPS of -$0.79. In analyst updates, BMO Capital raised its price target for Lemonade to $42 from $23, while maintaining an Underperform rating. BMO Capital highlighted Lemonade’s growth potential, noting it requires less capital compared to its peers due to fewer rating agency restrictions. Additionally, Jefferies increased its price target for Lemonade to $37 from $30, also maintaining an Underperform rating. Jefferies pointed to increased premium retention as a driver for stronger revenue growth, though it also noted concerns over higher leverage and declining book value. These developments reflect ongoing interest and analysis of Lemonade’s performance and prospects.
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