Keefe, Bruyette & Woods raised its price target on Lemonade Inc. (NYSE:LMND) shares to $44 from $40 while maintaining an Underperform rating, the firm said in an update Monday. The upward revision in valuation followed the company’s fourth-quarter 2025 results, which outpaced expectations largely due to prior-year development.
Reasoning behind the change
KBW said it adjusted its forecasts to reflect stronger premium growth and lower loss ratios reported in the quarter, though those positives were partly offset by higher operating expenses. The firm also set its first-quarter 2026 estimate slightly below Lemonade’s own guidance to allow for potential damages stemming from ongoing Northeast winter storms.
Stock movement and market context
Shares of Lemonade have suffered a marked pullback from recent highs. The stock fell almost 50% from a peak of $99.90 recorded a month ago and was trading at $50.51 at the time of the note. The decline has accelerated in the short term, with a 21.8% drop over the past week alone and a 29% fall year-to-date. Despite that volatility, the share price still reflects a 45.6% gain over the past 12 months. KBW also highlighted the stock’s elevated beta of 2.05.
The firm referenced analysis from InvestingPro that indicates the stock may be undervalued at current levels, with that platform’s Fair Value suggesting upside potential.
Outlook and analyst concerns
KBW retained its Underperform stance because it expects downside risk versus consensus forecasts for 2027. The analyst team pointed to several structural concerns, including the potential for AI-driven disruption in personal lines insurance and increasing competition in the insurtech space.
KBW warned that delivering 30% plus growth while maintaining persistently low loss ratios and continuing to acquire customers efficiently may prove difficult at the same time, particularly as competitive pressure intensifies. Those execution risks underpin the firm’s caution despite the recent operational beats.
Quarterly results
Lemonade reported fourth-quarter 2025 results that topped analyst expectations on both the bottom line and revenue. The company recorded earnings per share of negative $0.29, beating the forecasted negative $0.39, which the firm characterized as a 25.64% positive surprise. Revenue for the quarter was $228 million, above the anticipated $216.26 million, representing a 5.43% surprise.
Those results signaled a stronger-than-expected performance for the period and were noted as a positive data point for investors. The company’s showing has drawn attention from financial analysts, although KBW’s note stated that specific upgrades or downgrades from other analysts were not detailed in its commentary.
Implications for investors
KBW’s decision to lift its price target despite keeping an Underperform rating illustrates a mixed view: recognition of recent operational improvement balanced against medium-term execution and competitive risks. The firm’s modestly conservative early-2026 estimate to reflect possible storm-related claims is an example of the near-term uncertainty that analysts are factoring into models.
Investors watching Lemonade should weigh the company’s ability to sustain premium expansion and low loss ratios against rising operating costs and the competitive dynamics in personal lines insurance highlighted by KBW.