Morgan Stanley said Lemonade is expected to benefit from an improved position in self-driving car insurance. The bank upgraded insurance stocks from equal weight to overweight. Analyst Bob Jiang Huang’s new price target is set at $80 to $85, representing a 47% upside from Monday’s closing price. Huang wrote that self-driving cars are likely to change the way auto insurance is underwritten over time. As self-driving cars reset the competitive advantage of some insurance companies, Jiang believes new winners like Lemonade are likely to emerge in the industry. He wrote that he has become more positive about Lemonade’s competitive positioning. The move comes after Lemonade made the announcement after analysts pointed to Lemonade’s self-driving car insurance partnership with Tesla. The deal offers Tesla owners a 50% discount for every drive they take using fully self-driving technology, without sacrificing underwriting discipline. “Lemonade’s partnership with Tesla is an important first step, giving Lemonade a first-mover advantage in data analysis and field experience. Lemonade offers a 50% discount on auto insurance when Fully Self-Driving (FSD) is implemented in Tesla vehicles, but the company maintains underwriting discipline based on the quotes we have seen,” the analysts wrote. He further added, “As the automotive market continues to evolve towards self-driving, Lemonade expects to expand its self-driving exposure geographically and grow its business tenfold, primarily through Lemonade Cars. This should give the company the scale it needs to meaningfully improve its long-term revenue profile.” Lemonade’s share has fallen 19% this year. Over the past 12 months, they’re up 56%.
