Lemonade’s stock has nearly doubled since its IPO.
It will continue to gain more customers as it expands its AI-driven ecosystem.
Lemonade (NYSE: LMND), the online insurer that uses AI chatbots to onboard customers and process claims, went public at $29 per share in July 2020. Today, its stock trades at about $55 — yet it’s still below Wall Street’s median price target of $65. Should you buy Lemonade’s stock before it hits that price? Let’s review its business model and growth rates to make a decision.
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Lemonade’s digital-first approach attracted many younger and first-time insurance buyers who were intimidated by the byzantine process of buying insurance. It initially offered only homeowners and renters insurance, but expanded into the term life, pet health, and auto insurance (via its acquisition of Metromile) markets after its public debut.
At the end of 2025, Lemonade served 2.98 million customers, up from 1.00 million at the end of 2020. Over the past five years, it consistently grew its in-force premium (IFP) and gross-earned premium (GEP) at high double-digit rates while reducing its gross loss ratio. That stable expansion boosted its gross margins, but it’s still unprofitable.
|
Metric |
2020 |
2021 |
2022 |
2023 |
2024 |
2025 |
|---|---|---|---|---|---|---|
|
Customer Growth (YOY) |
56% |
43% |
27% |
12% |
20% |
23% |
|
IFP Growth (YOY) |
87% |
78% |
64% |
20% |
26% |
31% |
|
GEP Growth (YOY) |
110% |
84% |
68% |
37% |
23% |
28% |
|
Gross Loss Ratio (TTM) |
71% |
90% |
90% |
85% |
73% |
64% |
|
Adjusted Gross Margin |
33% |
36% |
25% |
23% |
33% |
41% |
Data source: Lemonade. YOY = Year-over-year. TTM = Trailing 12 months.
However, Lemonade expects its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to turn positive (for at least a quarter) this year as its AI platform trims its expenses and economies of scale kick in. It also expects its IFP to increase from $1.24 billion in 2025 to about $10 billion in the “coming years”.
From 2025 to 2027, analysts expect Lemonade’s revenue to grow at a 41% CAGR, with adjusted EBITDA turning positive in the final year. With an enterprise value of $4.5 billion, it still looks reasonably valued at 3.8 times this year’s sales.
If Lemonade’s stock rises 18% to $65, it would still trade at 4.4 times this year’s sales. If it matches Wall Street’s estimates in 2028, and trades at a more generous five times forward sales by the beginning of the year, its stock could rise nearly 130% over the next two years.
That could easily outperform the S&P 500’s average annual return of 10%. Still, investors should keep a close eye on its stock-based compensation expenses (which accounted for 8% of revenue in 2025) and its share count (which has risen 39% since its IPO). That said, Lemonade could still have a bright future — as long as it keeps pulling younger customers away from conventional insurers while steadily expanding its ecosystem with new policies and features.
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.
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