Should You Buy Lemonade Stock Before Feb. 19?

Lemonade (NYSE: LMND) is finally getting some market love, and its stock has doubled over the past year. The artificial intelligence (AI) and machine learning-driven insurance platform is gaining new customers and demonstrating accelerating growth, and it's getting closer to net profitability.

It's scheduled to provide its fourth-quarter earnings update on Feb. 19. Is now the time to buy?

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High expectations

Lemonade is just over a decade old, and it's already becoming a major player in insurance, facing off against centuries-old competition. It has an edge in its digital platform with interconnected parts, and the large legacy insurance giants are trying to keep up.

It's attracting customers at a rapid pace, hooking them into lower-priced products as they start out with rentals and home ownership, with the strategy to cross-sell products as this clientele ages. That puts it at a disadvantage in the short term, but sets it up for long-term success, and the strategy is already working.

Another element of that model that has been a sore point is that as a young company with less data, the company's algorithms have been in a training stage. The company's loss ratio, which measures how much it pays out as claims, has been high for an insurance company. However, the machine learning edge is kicking in as Lemonade adds more data to the system, and the loss ratio has started a serious decline. It was 67% in the 2025 third quarter for the trailing 12 months, a full 10 percentage points lower than the previous year.

Management is guiding for in-force premium, its favored top-line metric, to increase 29% year over year in the fourth quarter, with a 48% increase in revenue. It's also expecting adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be a $14.5 million loss, an improvement from a $24 million loss the previous year, and it's expecting to become profitable on an adjusted EBITDA basis by the end of this year.

A premium stock price

At the current price, Lemonade stock has started to become expensive again. It trades at a price-to-sales ratio of 9. That premium could be justified considering Lemonade's high growth and long-term opportunity, but it doesn't give the company a lot of room for error.

Lemonade stock has started to slide over the past few weeks as insiders have been selling and the market is recognizing the hefty price tag heading closer to earnings. That gives it some room to bounce back if all goes right in the report. However, it could slide a lot more if the company misses on analyst expectations, guidance for 2026, or anything else the market doesn't like.

If you have a long time horizon and some risk tolerance, the best time to buy is now, earnings report or not. Don't buy it expecting the growth stock to jump after earnings, although if it does, you'll already be in a great position.

Jennifer Saibil has positions in Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.