Lemonade, Inc. (NYSE:LMND) last week reported its latest first-quarter results, which makes it a good time for investors to dive in and see if the business is performing in line with expectations. The results look positive overall; while revenues of US$119m were in line with analyst predictions, statutory losses were 8.4% smaller than expected, with Lemonade losing US$0.67 per share. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
After the latest results, the eight analysts covering Lemonade are now predicting revenues of US$515.0m in 2024. If met, this would reflect a solid 14% improvement in revenue compared to the last 12 months. The loss per share is expected to ameliorate slightly, reducing to US$2.97. Before this earnings announcement, the analysts had been modelling revenues of US$510.6m and losses of US$3.11 per share in 2024. It looks like there's been a modest increase in sentiment in the recent updates, with the analysts becoming a bit more optimistic in their predictions for losses per share, even though the revenue numbers were unchanged.
The average price target held steady at US$18.86, seeming to indicate that business is performing in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Lemonade analyst has a price target of US$40.00 per share, while the most pessimistic values it at US$10.00. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Lemonade's revenue growth is expected to slow, with the forecast 18% annualised growth rate until the end of 2024 being well below the historical 46% p.a. growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.9% per year. Even after the forecast slowdown in growth, it seems obvious that Lemonade is also expected to grow faster than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Lemonade. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Lemonade analysts - going out to 2026, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for Lemonade that we have uncovered.
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