The brokerage praised the company’s “differentiated” AI-driven technology and its roadmap to achieve net profit positivity by the end of 2027.
Shares of digital insurer Lemonade, Inc. ($LMND) surged over 6% in pre-market trading Wednesday, positioning the stock to hit near three-year highs if the momentum holds.
The rally follows an upgrade from Morgan Stanley, which raised its rating on LMND to ‘Equal Weight’ from ‘Underweight’ and boosted the price target to $42 from $23, citing optimism about the company’s long-term growth potential after its recent investor day event.
Morgan Stanley said Lemonade has "charted an ambitious goal" to grow its gross earned premiums (GEP) from $1 billion to $10 billion over the coming years.
The brokerage praised the company’s “differentiated” AI-driven technology and its roadmap to achieve net profit positivity by the end of 2027 — well ahead of consensus estimates.
An illustrative slide from Lemonade’s investor presentation reportedly suggested a potential valuation of $90 per share, assuming a 30% compound annual growth rate in GEP and a 12% adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio over seven years.
That projection implies a 125% upside from the previous session’s close of just over $40.
On Stocktwits, retail sentiment mirrored the market’s enthusiasm, with the score flipping into the ‘extremely bullish’ zone pre-market.
Discussions about Lemonade spiked significantly, reflecting renewed optimism around the stock’s future prospects.
Last month, Lemonade reported third-quarter revenue of $136.6 million, up 19% year-over-year, driven by increases in premiums and investment income.
While its adjusted EBITDA loss widened to $49 million from $40.2 million a year earlier due to growth-related spending, the company’s per-share loss of $0.95 came in better than the expected $1.00.
LMND shares have gained over 135% year-to-date, outperforming broader market indices as investors increasingly bet on the company’s disruptive approach to the insurance industry.
