Where Will Lemonade Stock Be in 5 Years?

Key Points

• Lemonade is growing fast, adding thousands of new customers and reporting accelerating growth.

• Its loss ratio is declining, but it's still reporting net losses.

• Management believes it has an edge over legacy insurers due to its digital technology.

Lemonade (NYSE: LMND) has experienced explosive growth since going public, and its stock is climbing, up more than 160% during the past year. The insurance technology company has made some serious progress, although there are still risks. Let's see where it might be five years from now and whether it's a good time to buy Lemonade stock.

Where Lemonade is now

Lemonade is 10 years old as of July, and it's been quite a decade. The company uses artificial intelligence (AI) to disrupt traditional insurance and offer a better product for policy holders. It was built using digital processes and AI throughout its business, including having chatbots onboard customers and assess claims. That may not sound so impressive today, as AI becomes the norm for many companies, but Lemonade has been doing this for years. It relies on data, machine learning, and continually improving algorithms to get things right, cutting out human intervention and lots of headaches and hassle for the average policyholder.

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This is proving to be a popular alternative, and Lemonade is attracting customers at a rapid pace. It had more than 2.5 million customers as of the end of the 2025 first quarter, a 21% year-over-year increase. The premium per customer is also increasing, up 4% year over year in Q1 to $396. Together, that's leading to increased in-force premium (IFP), Lemonade's preferred top-line metric. It surpassed $1 billion in Q1 for the first time, up 27% from last year. Lemonade has been reporting strong growth since it went public, but it has accelerated the past six quarters.

As with many young companies, Lemonade isn't profitable. As an insurance company, it measures its progress and success with metrics beyond revenue and net income. One of the most crucial profitability metrics for an insurance company is the loss ratio, or how much it collects in premiums versus paying policy claims, and Lemonade has been struggling here. Recently, however, it looks like it's going in the right direction, which is down. The Q1 loss ratio was 78%, down one percentage point from last year, and the trailing-12-month loss ratio was 73%, in line with 2024's Q4 and below the company's short-term target of 75%. All good there.

This incredible performance has been lightening the market's mood about the continued net losses. The net loss was $62 million in Q1, worse than $47 million a year earlier.

Building for the future

Buying into Lemonade's thesis and stock is really a bet on its ability to disrupt traditional insurance. Chief Executive Officer Dan Schreiber sees that as a given and that it will happen, and it's just a matter of time before Lemonade's business outperforms its legacy competitors.

Schreiber notes that, although it's perceived that all insurance companies are using AI today, that's not actually the case. Many of the large, traditional giants are taking a wait-and-see approach, and it's not so simple to switch over all of their systems to the kind of digital substrate where all parts connect and communicate that Lemonade has. Those companies still heavily rely on outside sales agents, who bring in 62% of all property and casualty premiums, giving Lemonade a leg up in this game.

Schreiber thinks that the company's AI technology will be even more potent in the next five to 10 years, and he explains that

before the decade is out, those that are moving at the pace of AI will find that the same $1 million that buys one squad's worth of engineering firepower in 2025 will deliver the equivalent of 90,000 engineers in 2030.

Lemonade is well positioned to jump ahead of the competition as that happens. It will also help it on its journey to profitability. Many companies are already restructuring their workforces as they get more done with AI.

Today, Lemonade is still in scale mode, spending a lot on marketing to grab more customers. The expectation is that eventually, the revenue from these customers will be more than the money the company is spending on getting them. Its other operational costs have remained constant due to its reliance on AI systems, and because this is insurance, each new customer has lifetime value as they renew their policies, so long as Lemonade can impress them and keep them.

Is now the time to buy?

Management expects to report positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of 2026. That would be a milestone, but Wall Street is still expecting a net loss of $1.97 per share next year. Management is shooting for positive net income by the end of 2027 and beyond.

If that's the way things go, shareholders are in for a treat. Even if there are hiccups along the way, it does look like five years from now, Lemonade will be bigger and profitable, and its stock should reflect that.

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