Lemonade Soared by 94% in 2025, but Here's Another Financial Stock to Buy in 2026

The price of Lemonade (NYSE: LMND) skyrocketed in 2025 by some 94% -- and I don't mean the refreshing drink. In this case, I'm referring to the insurance stock that uses AI chatbots and algorithms to process insurance claims.

But it may be hard for this innovative fintech to duplicate that level of share price growth in 2026, mainly because the company is still unprofitable, its stock's valuation soared, and it's in an extremely competitive landscape.

After hitting a high of $145 in 2021, Lemonade's stock price plummeted all the way down to under $10 per share in 2023 and was around $31 per share near the start of 2025. Investors were scooping up shares at a discount last year, particularly as revenue and other metrics improved. But now, at a higher valuation and still chasing profitability, investors are less bullish.

For 2026, investors may want to shift their focus to a new potential breakout financial stock -- Affirm (NASDAQ: AFRM).

Image source: Getty Images.

Affirmative on Affirm

When the buy now, pay later trend started up a few years ago, Affirm was one of the most recognizable -- and its stock price soared for a lot of the same reasons as Lemonade. It was an innovative new concept that generated a lot of buzz and soared to over $160 per share during the tech bubble.

Like Lemonade, Affirm stock came crashing down during the bear market to around $10 per share. But it steadily gained revenue and moved toward profitability over the last two years, actually becoming profitable last year.

In the fiscal 2026 first quarter, which ended Sept. 30, 2025, revenue jumped 34% year over year with gross merchandise volume (GMV) rising 42%. Net income was $81 million, up from a $100 million net loss in the same quarter the previous year. For Q2, management expects a 10% to 14% increase in revenue sequentially, and a 20% to 23% jump in GMV, along with a higher operating margin at the midpoint.

But there are other recent catalysts that should lift Affirm stock higher in 2026. One is the potential cap on credit card interest rates proposed by President Donald Trump. While this is not a lock to happen, if it does, Affirm would likely benefit if it causes credit card issuers to have stricter credit standards, which could drive more customers to BNPL's like Affirm, which would not be subject to the cap and fixes its interest upfront in the installment payments.

Boost from bank charter

Another catalyst is Affirm's recent application to be an industrial loan bank, meaning it can take deposits and make loans directly. Currently, because it's not a bank, Affirm must partner with other banks to make the loans for the BNPL purchases. This not only costs more, it eats into its profits.

It is one of the reasons analysts are bullish on Affirm, as the stock is considered a buy by 70% of analysts and has a median price target of $95 per share, which would be up 40% from the current price.

Its valuation is high, but it's skewed somewhat by only two recent quarters of earnings. But its five-year PEG ratio based on expected earnings puts it in the value zone. I think it's one financial stock that could be on the rise this year and one that long-term investors should consider.

Dave Kovaleski 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.