New Lemonade Price Target After AI Insurance Name Sees '10-Fold' Profit Boost
With a 37% gain since August, Lemonade shares could see more upside.
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The holiday party season is upon us. Soon, you may find yourself sipping a hot toddy, or enjoying some egg nog. I’m betting that lemonade, the summer beverage, is the furthest thing from your mind.
However, Lemonade (LMND) , the AI-focused online insurance provider, is front and center on my mind today. Shares of the New York-based insurer jumped 4.6% on Thursday to trade at its highest intraday level in over four years.
The Case for Lemonade
Back in August, I presented my case for buying Lemonade. Shares of the online insurance provider had just broken out from a nine-month long consolidation to reach a three-year high of $60.
At that time, we placed a price target of $85 on the stock. Since then, Lemonade shares have gained 37%. The stock now trades just 4% below our former target price of $85.
Lemonade shares have gained 125% year to date. The stock remains well above its rising 50-day (blue) and 200-day (red) moving averages, a bullish sign.
Where are Lemonade shares headed next? The stock is on the verge of breaking out from a consolidation pattern known as an ascending triangle (black lines). This bullish formation suggests Lemonade could climb as high as $104, a level that now becomes our new price target for the stock.
When Lemonade issued its Q3 report last month, the company beat analysts’ expectations for both revenue and earnings. Lemonade’s loss was smaller than anticipated, and revenues were about 5% above estimates.
Lemonade Leverages AI
What really has investors excited about Lemonade is the way the company is leveraging AI. Check out these recent remarks by Lemonade CEO Daniel Schreiber:
“In the last three years, we added a million customers, we’ve three-fold increased our revenue, we’ve 10-fold increased our gross profit, and yet our actual headcount is down.”
Schreiber went on to say that despite eight consecutive quarters of accelerating growth, costs have remained flat. What Lemonade once considered variable expenses are now fixed costs.
Times Have Changed
A few years ago, an AI-driven business model of this nature would’ve seemed mind-boggling. Now we accept it as inevitable.
The idea of a company growing at lightning speed while simultaneously reducing headcount would’ve been unthinkable just a few years ago. In the future, it’ll be the norm. For Lemonade and its investors, that future is now.
At the time of publication, Ponsi was long LMND.
