On Monday, Jefferies updated its financial outlook for Lemonade Inc. (NYSE: LMND), increasing the price target to $16 from the previous $14 while maintaining an Underperform rating on the stock. The revision follows Lemonade's first quarter performance, which surpassed expectations mainly due to favorable prior year development (PYD).
The firm's analyst pointed out that this positive PYD is not expected to be a recurring factor in their financial models.
The analyst indicated that Lemonade's cash flow guidance for the year-end 2024 has been raised, yet the adjusted EBITDA profitability target for the year 2026 has been reiterated. It is anticipated that the company's growth will accelerate in the remaining months of 2024 as more rates earn in and following increased spending on growth initiatives.
Still, this growth is expected to come alongside greater weather-related losses, leading to higher projected adjusted EBITDA losses for the second and third quarters, albeit with an improvement year-over-year, before seeing an improvement in the fourth quarter of 2024.
The updated stock price target of $16 represents a projected negative return of 12 percent, justifying the continuation of the Underperform rating. The analysis suggests that while there may be short-term improvements, the overall outlook remains cautious due to the expected increase in losses associated with growth and weather-related events.
In summary, Jefferies' stance on Lemonade Inc. reflects a guarded perspective on the company's near-term financial performance, despite a modest increase in the price target. The firm anticipates that Lemonade will face challenges that may impact its profitability, even as it works towards its long-term financial goals.
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