Lemonade Q2 Earnings Surpass Estimates, Analysts See Mixed Outlook

Lemonade Inc. (LMND) shares surged 35% after beating Q2 earnings estimates. Analysts provide a mixed outlook with price targets indicating potential downside. The stock currently holds a "Hold" rating among brokerage firms. The average one-year price target is $35.33, implying a 27.86% downside from the current price. GF Value estimates suggest a 12% downside in one year.

Lemonade Inc. (LMND) shares surged 35% after the company reported second-quarter 2025 earnings that exceeded analyst expectations. The insurer's stock price climbed to $11.80, up from $8.70 at the start of July. The strong performance was driven by a 34.5% year-over-year (YoY) increase in revenue to $164.1 million, which surpassed the Zacks Consensus Estimate of $162.39 million by 1.05% [1].

Despite the revenue growth, Lemonade reported a net loss of $0.60 per share, which was narrower than the Zacks Consensus Estimate of a loss of $0.81. The improvement in net loss was primarily attributed to higher revenues and improved underwriting results, offset by escalating expenses [2].

Key metrics that drove Lemonade's financial performance include:

- In-force premium increased 29% YoY to $1,083.4 million, marking the seventh consecutive quarter of growth acceleration.
- Net investment income rose 16% YoY to $9.4 million.
- Customer count increased 24% YoY to 2,693,107.
- Premium per customer grew 4% YoY to $402.
- Gross earned premium increased 26% YoY to $252.3 million.
- Gross profit doubled YoY to $64.3 million.
- Gross margin improved by 14 points to 39%.
- Adjusted gross profit surged 96% YoY to $65.6 million.

However, total operating expenses, excluding net loss and loss adjustment expense, increased 21% YoY to $129.2 million, primarily driven by higher growth spend for customer acquisition. This was partially offset by a one-time $11.7 million tax refund received under the Employee Retention Credit (ERC) program [2].

Lemonade's stock currently holds a "Hold" rating among brokerage firms, with an average one-year price target of $35.33, implying a 27.86% downside from the current price. GF Value estimates suggest a 12% downside in one year [2].

The mixed outlook from analysts reflects the company's ability to grow revenue and improve underwriting results, but also concerns about the increasing expenses and potential downside risks. Investors should closely monitor Lemonade's guidance for the third quarter and the rest of the year to assess the company's growth trajectory and potential risks.

References:
[1] https://www.nasdaq.com/articles/lemonade-lmnd-q2-earnings-taking-look-key-metrics-versus-estimates
[2] https://www.nasdaq.com/articles/lemonade-q2-loss-narrower-expected-revenues-rise-y-y