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Investing.com - BMO Capital has raised its price target on Lemonade Inc. (NYSE:LMND) to $42.00 from $23.00 while maintaining an Underperform rating on the insurance technology company. The stock, currently trading at $56.7, has shown remarkable momentum with a 255% return over the past year, according to InvestingPro data.
The firm estimates Lemonade’s growth will require less capital compared to personal insurance peers because it faces fewer restrictions from rating agencies. BMO notes that Lemonade is rated by Demotech rather than A.M. Best since it has no public debt outstanding. With revenue growing at 27.5% year-over-year and a manageable debt-to-equity ratio of 0.27, InvestingPro analysis reveals 10+ additional insights about the company’s financial health.
BMO Capital believes this rating structure allows Lemonade to offset using less external reinsurance by leveraging a captive Cayman entity. Despite the higher price target, the firm maintains that Lemonade’s current stock price reflects a best-case scenario in which the company can scale profitably in the highly-competitive auto insurance market.
The new $42 target price is based on a 25x multiple to BMO’s 2029 estimated earnings per share, discounted back to present value. This represents a discount to the approximately 30x multiple that would be needed to justify a price target near $60.
BMO acknowledges that while Lemonade growing revenues in line with Kinsale’s historical 38% compound annual growth rate is realistic, the firm applies a discount to Kinsale’s 30x historical average P/E multiple because Lemonade hasn’t yet demonstrated profitability.
In other recent news, Lemonade Inc. reported its second-quarter earnings for 2025, surpassing revenue expectations with $164 million, compared to the anticipated $160.39 million. Despite posting a negative earnings per share (EPS) of -$0.60, the company performed better than the forecasted EPS of -$0.79. Additionally, Lemonade showed a significant improvement in its gross loss ratio. In analyst updates, Jefferies raised its price target for Lemonade to $37 from $30, while maintaining an Underperform rating. Jefferies highlighted increased premium retention as a driver for stronger revenue growth but noted concerns about higher leverage and declining book value. These developments indicate ongoing challenges for Lemonade, with net profitability still expected to be years away according to Jefferies.
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