TLDR
- Shares of Lemonade (LMND) declined approximately 10-12% after releasing Q4 2025 results
- Fourth quarter revenue reached $228.1 million alongside a $0.29 per share net loss
- Annual 2025 revenue totaled $737.9 million as the company narrowed its losses compared to the previous year
- Piper Sandler reduced its price target from $85 down to $65 while keeping a Neutral stance
- Guidance for 2026 forecasts revenue between $1.187–$1.192 billion but anticipates an adjusted EBITDA loss of $48–$52 million
Shares of Lemonade (LMND) tumbled approximately 10-12% in the trading sessions after the company unveiled its Q4 2025 financial results on February 19, 2026.
The decline occurred despite the insurtech company delivering what were arguably its strongest quarterly figures to date.
Revenue for the fourth quarter totaled $228.1 million, representing a 53% increase from the same period a year earlier. The per-share net loss improved to $0.29, while the adjusted EBITDA loss compressed to approximately $5 million during the three-month period.
The company’s in-force premium climbed to roughly $1.24 billion, marking yet another milestone.
For the complete 2025 fiscal year, revenue totaled $737.9 million. The annual net loss came in at $165.5 million, representing an improvement from the previous year’s deficit.
Executives emphasized record-setting gross profit figures and enhanced cash flow generation as evidence that the business model is reaching maturity.
Wall Street Grows Skeptical
Piper Sandler responded swiftly following the earnings release, slashing its price target from $85 down to $65 while maintaining its Neutral outlook.
The investment firm cited Lemonade’s consistent inability to achieve its adjusted EBITDA projections as the primary concern. Despite improvements in underwriting performance, the company continues to fall short of its own profitability milestones.
While Piper admitted its perspective might be “overly simplistic,” recognizing that Lemonade demonstrates solid execution in direct-to-consumer personal lines insurance, the reality is that shareholder patience has begun to erode.
The consensus Wall Street price target currently stands at $65.11, suggesting roughly 14% potential upside from Friday’s closing price of $57.31. Among 11 covering analysts, three assign Buy ratings or higher, five recommend Hold, and three advise Sell.
2026 Outlook Falls Short of Expectations
Looking ahead to 2026, Lemonade provided guidance calling for revenue in the range of $1.187–$1.192 billion. The top-line growth projection remains robust.
However, management simultaneously forecast a full-year adjusted EBITDA loss between $48–$52 million.
The first quarter of 2026 alone is anticipated to produce an adjusted EBITDA loss ranging from $22–$25 million.
Management does anticipate achieving positive adjusted EBITDA during Q4 2026, with plans to reach full-year EBITDA profitability by 2027.
That schedule remains unchanged — which is precisely what’s troubling the market. Many analysts and shareholders had anticipated the company might accelerate its profitability timeline.
The disconnect between impressive revenue growth and the extended path to profitability is fueling the current sentiment shift.
AI Capabilities Expand
On a more positive note, Lemonade showcased meaningful product innovation. The company introduced an AI-powered autonomous auto insurance offering during the quarter.
Its proprietary AI platform, Blender, now empowers claims adjusters to process triple the workload they could handle previously.
Executives noted that AI implementations are now visible across “pretty much every line” of the company’s financial statements.
Marketing expenditures have more than tripled, fueled by AI-driven enhancements in pricing algorithms and customer targeting capabilities.
Looking toward the long term, Wall Street projects revenue climbing to $1.8 billion with earnings of $201.4 million by 2028. More optimistic forecasts had previously estimated revenue could reach $2.0 billion by that timeframe.
Piper Sandler’s revised $65 price target represents 13.4% potential appreciation from the latest closing price of $57.31.
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