Lemonade, Inc. (LMND): A Bull Case Theory

We came across a bullish thesis on Lemonade, Inc. on Make Money, Make Time’s Substack by Oliver | MMMT Wealth. In this article, we will summarize the bulls’ thesis on LMND. Lemonade, Inc.'s share was trading at $57.20 as of August 20^th.

Lemonade (LMND) delivered a strong Q2 2025 performance, reinforcing its case as one of the few companies capable of disrupting the $7.5 trillion insurance market through AI-driven automation. The company’s in-force premium (IFP) grew 29% year-over-year to $1.083 billion, exceeding guidance, with customer growth accelerating to 2.69 million, largely fueled by European expansion.

While premium per customer remains low at $402 compared to the U.S. average of ~$4,000, the growing base of renters and pet insurance customers provides a sticky entry point for future cross-selling into higher-value segments like auto and home. Importantly, LMND’s loss ratio improved to 70%, with auto loss ratios reaching a record low of 82%, demonstrating underwriting progress. Management also reduced reinsurance reliance from 55% to 20%, a move reflecting confidence in their models and reserves, while simultaneously unlocking higher revenue retention.

Although adjusted EBITDA remained negative at $40.9 million, operating expenses excluding growth spend were flat, validating LMND’s model of combining exponential revenue growth with cost control through AI. With a lifetime value-to-customer acquisition cost ratio above 3x and potential expansion to over 5x as auto scales, current growth investments are laying the foundation for long-term profitability. Management reiterated EBITDA breakeven by 2026, with hints this could come sooner.

European markets present significant upside due to faster adoption of telematics and less dominance by entrenched incumbents, while U.S. auto expansion is gaining traction with improved pricing precision. At current valuation, LMND trades at just 10x projected 2026 gross profit despite expected ~51% annual growth. For long-term investors, LMND offers a compelling risk/reward profile as the only AI-native insurer positioned to disrupt multiple verticals.

Previously, we covered a bullish thesis on Lemonade, Inc. (LMND) by Oliver | MMMT Wealth in April 2025, which highlighted the company’s resilience to tariff-related volatility through pet and renters insurance focus and limited auto exposure. The stock has appreciated approximately 98.32% since coverage, as the thesis played out. The thesis still stands, with Oliver now emphasizing AI-driven growth, European expansion, and improving loss ratios.

Lemonade, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held LMND at the end of the first quarter which was 25 in the previous quarter. While we acknowledge the potential of LMND as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.