Why Lemonade Stock Wilted by Almost 9% on Wednesday
Key Points
The insurer's stock is no longer a buy, according to a pundit's latest update.
While he feels the company still has potential, a recent rally in the share price has left it fairly valued.
- 10 stocks we like better than Lemonade ›
Lemonade (NYSE: LMND) stock was nearly as sour as its favorite fruit on Wednesday, at least as far as its stock was concerned. Shares of the insurer dived by nearly 9% during that trading session after an analyst at an influential investment bank downgraded his recommendation on the stock.
Time for a downgrade
Well before market open that day, Morgan Stanley's Bob Huang moved his Lemonade rating down one peg to equalweight (read: hold) from his preceding overweight (buy). He also set a price target of $75 per share.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
According to reports, while Huang feels that the company's momentum continues to be strong, the company requires a new catalyst to justify its current price levels. These have risen by around 50% over the past few weeks, the analyst pointed out.
For him, the development to watch will be how the next-generation insurer manages what he considers to be a "softening" auto insurance market. That's a challenge in and of itself, and will be something of a test to see how well it can cope.
Look past the price
I'd agree with Huang about Lemonade's positive momentum, particularly given the sweetened reinsurance program it recently announced. Yes, the shares look expensive, but the company has lately proved it can be quite the nimble and effective operator in an always-competitive field. I'm more positive on its potential for gains than the Morgan Stanley analyst; I'd even consider it a buy candidate.
Should you buy stock in Lemonade right now?
Before you buy stock in Lemonade, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lemonade wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $410,833!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,208,693!*
Now, it’s worth noting Stock Advisor’s total average return is 917% — a market-crushing outperformance compared to 209% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of July 8, 2026.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.
Recommended Articles
