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In January, Lemonade debuted an autonomous car insurance product. Last week, Morgan Stanley boosted its price target on Lemonade from $80 to $85, citing the promise of that new offering. The upstart insurer remains unprofitable.
On March 17, Morgan Stanley upgraded Lemonade (LMND) from equal weight (hold) to overweight (buy) and raised its price target on the stock from $80 to $85.
By the end of the day, the upgrade helped send shares of the digital insurance company 15.8% higher from its March 16 closing price.
Morgan Stanley’s upgrade was tied to Lemonade’s early-mover advantage in autonomous vehicle insurance. While self-driving cars are not yet mainstream, the sector is expected to expand.
Grand View Research projects the global autonomous vehicle market will rise from $68 billion in 2024 to around $214 billion by 2030, implying a growing addressable market for insuring those vehicles.
In January, Lemonade launched autonomous car insurance, describing it as a first-of-its-kind product. The offering starts with Tesla’s full self-driving (FSD) system.
According to the company, the new product cuts per-mile rates for FSD-engaged driving by approximately 50%, reflecting data that indicates reduced risk during autonomous operation. Lemonade also expects further reductions as Tesla releases FSD software updates, which it anticipates will make cars safer over time.
Lemonade can access Tesla vehicle data with a customer’s permission and use that information in its risk-prediction models.
Lemonade (NYSE: LMND)
The article notes that a single analyst upgrade does not automatically make a stock an attractive investment. However, for Lemonade, the move was presented as recognition from a major investment bank of the value in its business strategy.
The approach of using granular data on when Teslas are in self-driving mode to offer discounted rates is described as aligning with Lemonade’s digital-first, lower-cost brand positioning, potentially giving it an early edge in self-driving car insurance.
The article emphasizes that this is new territory. It also highlights that Lemonade is not profitable.
It states that the stock price is around $5 below its 2020 debut closing price of $69.41. It also notes that shares generally traded below $25 during 2022 and 2023, reflecting the company’s early-stage nature. The article concludes that Lemonade’s shares are likely to remain volatile and frames the investment as speculative.
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