Key Points
-
Lemonade’s Q4 revenue rose 53% year over year, beating analyst estimates by a comfortable margin.
-
The stock trades at nearly twice the price-to-sales ratio of the next-most-expensive direct competitor.
-
A new insurance product for self-driving Teslas is live but too early to move the needle.
Shares of Lemonade (NYSE: LMND) started Thursday’s trading on a sweet note, opening the day 13.9% above Wednesday’s closing price. But the buzz didn’t last long. 90 minutes later, Lemonade was down 6.8% instead. As of this writing at 12:35 p.m. ET, the stock had settled at a 5.5% price drop. The chief reason for this drama was a spectacular earnings report paired with lofty valuation multiples.
Lemonade’s Q4 was almost too good
In Q4 2025, Lemonade’s in-force premium rose 31% year over year to $1.24 billion. Revenues rose faster with a 53% leap to $228 million. Gross profit soared 73% to $111 million.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
The bottom line was still printed in red ink, but the net loss shrank from $0.42 to $0.29 per share. The company generated $37 million of free cash flow, up from $27 million in the year-ago period.
It’s hard to find a weak metric in this report. The average Wall Street analyst expected a $0.39 loss per share on revenues near $216 million. Management issued next-quarter revenue guidance above the current Street view and set a breakeven target for fiscal year 2027.
But the stock was priced for perfection ahead of the report, trading at 8.9 times trailing sales at Wednesday’s market close. That’s a lot in the value-oriented sector of property and casualty insurance. The second-highest price-to-sales multiple I see today is Kinsale Capital Group at 4.7. The average P/S ratio among these 45 stocks is 1.4.
A hand holding an eraser to erase lots of question marks from a blackboard.
Image source: Getty Images.
Advertisement
Wall Street still wanted more
So Lemonade was priced for absolute perfection before this Q4 report. It delivered tremendous financials and the growth story continues with expanding access to European nations and American states. The recently launched discount plan for self-driving Tesla (NASDAQ: TSLA) cars is too new to make a difference, but management sees it as a core growth driver due to much more relevant risk data.
“As autonomous driving becomes safer and more widely adopted, prices should fall transparently, dynamically,” President Shai Wininger said on the earnings call.
The stock market already pays a generous premium for this potentially game-changing approach. Today, Wall Street just wasn’t ready to embrace Lemonade’s data-driven growth targets.
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 $420,595!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,152,356!*
Now, it’s worth noting Stock Advisor’s total average return is 901% — a market-crushing outperformance compared to 194% 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.
*Stock Advisor returns as of February 19, 2026.
Anders Bylund has positions in Lemonade. The Motley Fool has positions in and recommends Kinsale Capital Group, Lemonade, and Tesla. The Motley Fool has a disclosure policy.