Has insurtech Lemonade finally turned the corner?

Lemonade, the 10-year-old upstart insurtech, that has never earned a dime, has consistently hinted that profitability for the digital-first insurance company is just around the corner. Yet, much to the consternation of an impatient Wall Street, net income positivity has proven most elusive.

Lemonade’s $183 per share stock price achieved during the era of heightened enthusiasm for tech stocks in 2021 is but a distant memory as investors have settled for shares valued in the mid-teens for most of the next three years.

But things may have changed. Lemonade shares have increased 94% in the last three months, to around $35 per share, mostly on the strength of the company’s third, and fourth quarter and full year 2024 financial results. They showed an insurer with accelerating revenue growth, positive cash flow, and a declining loss ratio – its best showing by far. Can profitability, finally, be close behind?

'We are still on track'

“We are still on track, as we have been for two-plus years, to be EBITDA positive exiting 2025. I'm sorry, I said, 2025, I mean 2026,” Tim Bixby, Lemonade’s chief financial officer told investors last month. “And then GAAP profitability, while we haven't given an exact date…we expect it to follow within roughly a year thereafter.”

If it seems as though we have heard this before, we have. Though Bixby contends Lemonade’s financial projections haven’t changed at all for almost three years.

The latest results have turned around some analysts.

“In my view, Lemonade is a stock that’s ripe for a buying moment,” said technology investor Gary Alexander, writing on financial website Seeking Alpha “The tech-first insurance company has continued to grow its premium base while also improving its underwriting profitability. In my view, this is another moment to buy the dip in Lemonade.”

Star Investments, another Seeking Alpha contributor with nearly 6 million followers, also says the stock is a buy, highlighting Lemonade’s us of artificial intelligence to streamline customer onboarding, claims management, and rapid policy issuance, that gives it a huge competitive technological advantage that differentiates the company from other insurers.

Lemonade 'may be on to something'

“After the first couple of years on the market, it was tough to see evidence of its technological advantage or AI differentiating Lemonade in any way,” the analyst said. “However, as the company increased its scale and perfected its AI algorithms, evidence has emerged that Lemonade may be on to something.”

Since the second quarter of 2023, the company's trailing 12-month gross loss ratio has steadily declined from an abysmal 91%.

“We ended the year at 73% gross loss ratio right where we wanted to be and 12 points improved year-over-year powering significant margin expansion,” said Lemonade’s co-founder, CEO, and chairman Daniel Schreiber. “Our results for the quarter at 63% is our best result ever and by some margin.”

Lemonade’s gross profit doubled year-over-year to $167 million, again, a record high.

The company offers a range of insurance products, including renters, homeowners, life, pet, and car in just eight states. However, company executives contend there is pent-up demand for Lemonade car insurance.

Car insurance a 'top strategic priority'

“Car insurance is indeed of top strategic priority at the moment and is expected to be a significant growth engine in the next phase,” said president and co-founder Shai Wininger. “The essence of our growth strategy is that our best-in-class first party data will enable us to offer unbeatable prices for the customers we want. We possess a structural tailwind in the form of our waitlist and well over 2 million active customers. We expect this will enable us to grow the car business with efficiency levels unavailable to our competitors.”

Wininger said the company could boost its car insurance business by hundreds of millions of dollars rapidly and ultimately by billions of dollars without causing a degradation of its underlying business.

“We will spend much of 2025 still tinkering in that regard,” Schreiber said.

The company's fourth quarter of 2024 customer count increased 20% over the previous year's comparable quarter to 2.43 million.

Still, while its financial results beat most Wall Street analyst predictions, it reported a fourth quarter loss of about $30 million, an improvement from the $42.4 million loss in the same quarter of the previous year, but in the red, nonetheless.

And despite the optimistic signs there is still a bucket of unknowns that could stifle Lemonade’s progress and shake investor confidence - including inflation, the president’s planned tariffs, unpredictable natural disasters, and even technology glitches.

“If the U.S. economy stumbles, it could hurt Lemonade's revenue growth and profitability aspirations,” said Star Investments. “The market would likely react poorly to that news, and its stock price could decline.”

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].