Lemonade, Inc (NYSE: LMND)

Lemonade, Inc (NYSE: LMND) provides insurance solutions across renters, homeowners, car, pet, and life coverage. The company serves customers in the United States and Europe, including the United Kingdom, delivering its products through multiple distribution channels.

Key Business and Financial Updates:

• Strong Quarter and Upward Guidance: In the second quarter of 2025, Lemonade delivered robust financial results marked by accelerated growth, strong underwriting, and disciplined expense management. The company reported a 29% year-over-year increase in In Force Premium (IFP), reaching USD 1.08 billion, alongside a 35% revenue increase. This performance reflects Lemonade’s seventh consecutive quarter of growth acceleration. Gross loss ratio improved significantly to 67%, a twelve-point enhancement compared to the prior year, reinforcing consistent progress toward profitability. On the back of these results, management raised full-year 2025 IFP, Gross Earned Premium (GEP), and revenue guidance, while reaffirming Adjusted EBITDA expectations.
• Financial Performance Overview: Gross profit surged by 109% year over year to USD 64.3 million, supported by a 14-point improvement in gross margin to 39%. Adjusted free cash flow was USD 25 million, up USD 23 million from the prior year, and cash flow from operations stood at USD 6 million. Operating expenses rose 21% to USD 129.2 million, primarily driven by a 93% increase in growth spend, consistent with Lemonade’s accelerated expansion strategy. Excluding growth spend, operating expenses declined by 2%, indicating cost discipline. Net loss improved by 23% to (USD 43.9) million, while Adjusted EBITDA loss narrowed by 5% to (USD 40.9) million, reflecting improved underwriting results and higher revenue.
• Expansion of Lemonade Car: The Lemonade Car segment demonstrated sustained growth momentum, recording 12% sequential IFP growth, outpacing the overall business for the second straight quarter. Conversion rates benefited from telematics-based insights, with approximately 60% higher conversion compared to baseline levels. Marketing spend in Car rose 25% quarter over quarter while maintaining efficiency. Geographic expansion added momentum, with Colorado performing above expectations and Indiana launched in July 2025. Notably, Car’s gross loss ratio improved by 13 points year over year to 82%, the lowest since the product’s launch, showcasing effective risk segmentation enabled by telematics adoption.
• European Market Growth: Lemonade Europe emerged as a key growth driver, with IFP surpassing USD 43 million in Q2 2025, reflecting over 200% year-over-year growth. The business now contributes more than 20% of Lemonade’s net new customers. Europe benefits from structural efficiencies, including faster pricing iterations and reduced reliance on local teams, allowing AI-powered underwriting to scale across diverse markets. Loss ratios improved by 15 points year over year, landing in the low 80s. Compared to the U.S. business at a similar stage, Europe delivers more favorable loss ratios and double the new business per growth dollar spent, highlighting its potential as a long-term engine of profitable growth.
• Reinsurance Renewal and Strategic Positioning: In July 2025, Lemonade renewed its reinsurance program with long-term partners, materially maintaining existing terms while reducing its quota share cession from 55% to 20%. This deliberate shift allows the company to retain more revenue and gross profit, supported by improved loss ratios and underwriting predictability. The transition will occur gradually, with ceded premium percentages expected to ramp down over several quarters. Importantly, this change is not expected to materially affect capital requirements, as Lemonade Re offsets potential pressures. The move positions the company for stronger revenue retention and enhanced financial flexibility.
• Outlook for 2025 and Beyond: Looking forward, Lemonade projects third-quarter IFP between USD 1.14 billion and USD 1.15 billion, with revenue expected between USD 183 million and USD 186 million. For the full year 2025, IFP guidance ranges from USD 1.21 billion to USD 1.22 billion, revenue between USD 710 million and USD 715 million, and Adjusted EBITDA loss between (USD 140) million and (USD 135) million. Management reiterated expectations of achieving positive Adjusted Free Cash Flow for 2025 and anticipates reaching positive Adjusted EBITDA before the end of 2026. With strong execution across its Car and European businesses, coupled with the reinsurance strategy shift, Lemonade remains confident in its trajectory toward sustainable, profitable growth.

Technical Observation (on the daily chart):

Lemonade Inc. is in a medium-term uptrend, with price holding above the 50-day moving average (USD 50.66) despite recent consolidation below the 20-day (USD 53.81). The RSI at 44 suggests neutral momentum, leaving room for recovery. Key support lies at USD 50, while resistance is around USD 56–USD 60. A bounce from current levels could resume the bullish trend, but a break below USD 50 may shift bias toward USD 45 support.

As per the above-mentioned price action, important financial updates, momentum in the stock over the last three months, and technical indicators analysis, a ‘Buy’ rating has been given for Lemonade, Inc (NYSE: LMND) at the current price of USD 53.03, as of September 29,2025 at 8:40 am PDT. 

Individuals can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario. 

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 September 29,2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the New York Stock Exchange (NYSE), NASDAQ Capital Markets (NASDAQ), and or REFINITIV. Typically, all sources (NYSE, NASDAQ, or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.