Where Will Lemonade Stock Be in 5 Years?

The insurance nology company has made some serious gress, although there are still risks

Let's see where it might be five years from now and whether it's a good time to buy Lemonade stock

Where Lemonade is now Lemonade is 10 years old as of July, and it's been quite a decade

The company uses artificial intelligence (AI) to disrupt traditional insurance and offer a better duct for policy holders

It was built using digital cesses and AI throughout its, including having chatbots onboard customers and assess claims

That may not sound so impressive today, as AI becomes the norm for many companies, but Lemonade has been doing this for years

It relies on data, machine learning, and continually imving algorithms to get things right, cutting out human intervention and lots of headaches and hassle for the average policyholder

Image source: Getty Images

This is ving to be a alternative, and Lemonade is attracting customers at a rapid pace

Together, that's leading to increased in-force premium (IFP), Lemonade's preferred top-line metric

Lemonade has been reporting strong growth since it went public, but it has accelerated the past six quarters

As with many young companies, Lemonade isn't fitable

As an insurance company, it measures its gress and success with metrics beyond revenue and net income

One of the most crucial fitability metrics for an insurance company is the loss ratio, or how much it collects in premiums versus paying policy claims, and Lemonade has been struggling here

Recently, however, it looks it's going in the right direction, which is down

This incredible performance has been lightening the market's mood the continued net losses

Building for the future Buying into Lemonade's thesis and stock is really a bet on its ability to disrupt traditional insurance

Chief Executive Officer Dan Schreiber sees that as a given and that it will happen, and it's just a matter of time before Lemonade's outperforms its legacy competitors

Schreiber notes that, although it's perceived that all insurance companies are using AI today, that's not actually the case

Many of the large, traditional giants are taking a wait-and-see apach, and it's not so simple to switch over all of their systems to the kind of digital substrate where all parts connect and communicate that Lemonade has

Lemonade is well positioned to jump ahead of the competition as that happens

It will also help it on its journey to fitability

Many companies are already restructuring their workforces as they get more done with AI

Today, Lemonade is still in scale mode, spending a lot on marketing to grab more customers

The expectation is that eventually, the revenue from these customers will be more than the money the company is spending on getting them

Its other operational costs have remained constant due to its reliance on AI systems, and because this is insurance, each new customer has lifetime value as they renew their policies, so long as Lemonade can impress them and keep them

Is now the time to buy

If that's the way things go, holders are in for a treat

Even if there are hiccups along the way, it does look five years from now, Lemonade will be bigger and fitable, and its stock should reflect that

Jennifer Saibil has positions in Lemonade

The Motley Fool has positions in and recommends Lemonade

The Motley Fool has a disclosure policy.