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This Just In: Analysts Are Boosting Their Lemonade, Inc. (NYSE:LMND) Outlook for This Year

·3 min read

Shareholders in Lemonade, Inc. (NYSE:LMND) may be thrilled to learn that the analysts have just delivered a major upgrade to their near-term forecasts. Consensus estimates suggest investors could expect greatly increased statutory revenues and earnings per share, with analysts modelling a real improvement in business performance. Investors have been pretty optimistic on Lemonade too, with the stock up 30% to US$28.66 over the past week. It will be interesting to see if today's upgrade is enough to propel the stock even higher.

Following the upgrade, the current consensus from Lemonade's six analysts is for revenues of US$240m in 2022 which - if met - would reflect a sizeable 40% increase on its sales over the past 12 months. Losses are supposed to balloon 20% to US$4.87 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$215m and losses of US$5.43 per share in 2022. We can see there's definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year's revenue estimates, while at the same time reducing their loss estimates.

Check out our latest analysis for Lemonade

earnings-and-revenue-growth
earnings-and-revenue-growth

It will come as no surprise to learn that the analysts have increased their price target for Lemonade 11% to US$25.44 on the back of these upgrades. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Lemonade, with the most bullish analyst valuing it at US$40.00 and the most bearish at US$14.00 per share. We would probably assign less value to the forecasts in this situation, because such a wide range of estimates could imply that the future of this business is difficult to value accurately. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Lemonade's rate of growth is expected to accelerate meaningfully, with the forecast 96% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 35% p.a. over the past three years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.0% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Lemonade to grow faster than the wider industry.

The Bottom Line

The highlight for us was that the consensus reduced its estimated losses this year, perhaps suggesting Lemonade is moving incrementally towards profitability. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. With a serious upgrade to expectations and a rising price target, it might be time to take another look at Lemonade.

Analysts are definitely bullish on Lemonade, but no company is perfect. Indeed, you should know that there are several potential concerns to be aware of, including a short cash runway. For more information, you can click through to our platform to learn more about this and the 3 other warning signs we've identified .

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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