TLDR
- Shares of LMND declined 10–12% following its fourth quarter 2025 earnings announcement
- Fourth quarter revenue totaled $228.1 million, marking a 53% increase from the same period last year
- The company expects an adjusted EBITDA loss of $48–$52 million for fiscal year 2026
- Piper Sandler downgraded its price target from $85 to $65 while maintaining a Neutral stance
- Management now anticipates achieving full-year EBITDA profitability in 2027
Shares of Lemonade experienced a sharp decline of 10% to 12% in the trading sessions that followed the release of its fourth quarter 2025 earnings on February 19, 2026.
The sell-off occurred even though the insurtech company delivered what management characterized as its best quarterly performance to date.
Fourth quarter revenue climbed to $228.1 million, representing a year-over-year surge of 53%. The company reported a net loss of $0.29 per share for the period, while the adjusted EBITDA loss narrowed to approximately $5 million.
The company’s in-force premium reached approximately $1.24 billion, establishing a new company milestone.
For the complete fiscal year 2025, revenue reached $737.9 million. The annual net loss totaled $165.5 million, representing an improvement compared to the previous fiscal year.
Forward Guidance Disappoints the Street
Looking ahead to 2026, Lemonade provided revenue guidance ranging from $1.187 billion to $1.192 billion. At first glance, this represents substantial expansion.
However, the issue lies in the profitability outlook. Management forecast a full-year adjusted EBITDA loss between $48 million and $52 million, with the first quarter of 2026 alone expected to generate a loss of $22–$25 million.
The company anticipates achieving a positive adjusted EBITDA quarter in Q4 2026, with the path to full-year EBITDA profitability extending into 2027. This timeline remains unchanged from previous projections, which became the primary concern for market participants.
The disconnect between top-line expansion and bottom-line progress is what drove the negative market reaction.
Wall Street Responds with Caution
Following the earnings release, Piper Sandler reduced its price objective from $85 down to $65 while keeping its Neutral rating intact. The revised target represents approximately 13.4% potential upside from the latest closing price of $57.31.
The investment firm highlighted Lemonade’s track record of falling short of its own EBITDA projections as the primary area of concern, despite improvements in underwriting performance.
While Piper acknowledged their concerns might be considered “overly simplistic,” particularly given the company’s strong execution in direct-to-consumer personal insurance lines, market sentiment remained skeptical.
The consensus price target among Wall Street analysts stands at $65.11, suggesting roughly 14% upside potential. Among the 11 analysts providing coverage, three maintain Buy ratings or higher, five recommend Hold, and three rate the stock as Sell.
AI Expansion and Product Momentum
The earnings report included several encouraging developments. During the quarter, Lemonade introduced an AI-powered autonomous auto insurance offering.
The company’s proprietary AI platform, Blender, has enabled claims adjusters to process three times the volume they could previously handle. Leadership emphasized that artificial intelligence is now integrated across “pretty much every line” of the income statement.
Marketing expenditures have more than tripled, powered by AI-driven enhancements in customer segmentation and risk pricing.
Long-range financial models project revenue reaching $1.8 billion with earnings of $201.4 million by 2028. More optimistic forecasts had previously targeted revenue approaching $2.0 billion for that year.
The $65 price target from Piper Sandler represents the most current analyst assessment available for the stock.
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