Lemonade drops after Morgan Stanley turns bearish on increasingly competitive auto insurance market

LEMONADE

08/04/2025 18:41

Updates stock activity

** Shares of Lemonade LMND.N down 6.5% to $26.28 in early afternoon trading on Tues after Morgan Stanley downgraded to 'underweight' from 'equal-weight' pointing to more difficult macro environment

** LMND shares extend losses and set to drop for fourth straight session as broader equities surrender early gains .N

** Morgan Stanley slashed PT by $11 to $24

** Co could see higher loss costs, portion of a premium allocated to cover actual losses, due to tariffs as it seeks to expand into a more competitive and uncertain auto insurance market, Morgan Stanley says in note to clients

** While LMND has made progress toward profitability, co is still "several years away" from reporting positive GAAP net income, Morgan Stanley says, adding it believes the stock will be a relative underperformer to other P&C peers

** At its investor day in Nov, LMND charted plan to grow its business tenfold to $10 bln in premiums over the next few years, with auto insurance as a key driver

** Of 10 brokerages covering LMND, recommendation breakdown is 1 "buy", 5 "hold", 3 "sell" and 1 "strong sell" and their median PT is $25, LSEG data shows

** With move on Tues, stock down ~28% YTD and has roughly halved from its 1-yr high of $53.85 hit on Nov 25

(Lance Tupper is a Reuters market analyst. The views expressed are his own)

((lance.tupper@tr.com 1-646-279-6380))