Digital insurance co Lemonade worth more than Migdal, Clal

Lemonade president Shai Wininger explains why the company's share price has risen 152% over the past year.

Over the past year the Tel Aviv Stock Exchange (TASE) Insurance Index has risen 130% - more than any other index. On Wall Street too, the industry has outperformed on the S&P 500, although by a more modest 19%. Despite all this one Israel stock overseas has shined in recent weeks - digital insurance company Lemonade (NYSE: LMND), which has risen 152% over the past year, including 60% in the past two months alone.

The recent rises have pushed up its market cap to $2.9 billion, making Lemonade more valuation than Clal Insurance Enterprise Holdings (TASE: CLIS) and Migdal Insurance and Financial Holdings (TASE: MGDL).

Lemonade offers customers in the US property, building, vehicle insurance and more. The company was founded by CEO Daniel Schreiber and president Shai Wininger and held its Wall Street IPO in 2020 at a valuation of $1.6 billion. During the peak of the tech bubble Lemonade's market cap touched $10 billion but like so many companies lost a substantial part of its value. Even with the latest sharp rises, the company is still far from its record high market cap.

Wininger is not over-excited by the recent rises and tells "Globes," "The volatility in the market reminds us that we need to keep things in proportion. Both when the stock goes up and when it goes down, it's part of the game. It's clear that it's better for it to go up, but we don't view this as a reason to celebrate."

"Believe that the short trade will disappear"

Lemonade stock is hugely volatile, and has moved in a wide price range of $14-$53.9 over the past year. One reason for this volatility is the fact that it is a stock that is particularly popular among options traders. Almost 31% of the company's shares open for trading are short balances, meaning they are traded by investors who are pricing in the stock to go down.

"I think this is typical of companies that have significant disruption potential for industries, and are expected to have a naturally volatile tradjectory," explains Wininger. "This is a situation where a short trade can really profit, because they take advantage of volatility, and temporary declines are enough. I think it's a matter of time, and as the company progresses to positive EBITDA and stability is maintained, and it is perceived as a company that does not depend on the belief that it will happen, but rather that it has already happened - ultimately, I believe that the short trading will disappear."

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According to Wininger, "The market is starting to calm down. In the macro-economy, investors have developed a certain level of apathy. So many things have happened since Covid, the level of excitement has risen, things happen every day and the market manages to contain them. This is positive for stocks, because for quite a while companies were judged not by performance, but by their category and were influenced by larger things such as the availability of money."

Still losing tens of millions of dollars

Wininger attributes the rise in the stock to a kind of general calm in the market. But he also points to another factor: "The market is divided into two types of companies: those that are threatened by AI, and companies that are boosted by AI - like us. Everyone understands that there is something here that cannot be ignored. We founded Lemonade on the basis of AI 10 years ago and our use of technology and AI as an infrastructure has allowed us to meet or surpass forecasts overwhelmingly since the IPO."

However, in the meantime, growth is mainly reflected in revenue and premiums and improved profitability, but not yet in profit. Lemonade reported 27% growth in revenue to $151 million in the first quarter, but a net loss of $62.4 million and adjusted EBITDA of minus $47 million, which was negatively affected by the huge fires in California, where Lemonade insures homes. For the first time, the company surpassed the $1 billion mark in total premiums.

Lemonade expects to move to positive EBITDA by the end of 2026. "In the years after the IPO, the company ‘required’ investors to believe in a lot of things: the AI story, that we would be able to grow in a market with a lot of regulation and competition from established companies, that the cash in the coffers would be enough," says Wininger. "Today, those concerns don’t really exist. The coffers are growing, we’ve moved to positive cash flow, and there’s an expectation of positive EBITDA. The market is starting to believe the story."

Where will the next expansion come from?

"We always consider whether to expand broadly versus deeply. We always have the option of geographic growth. We are growing well in Europe, there is the option of expanding existing products to additional markets and the option of adding products."

Through acquisitions?

"In general, I believe more in building the technology ourselves. We have seen quite a few companies over the years, and we have discovered that the technological gap is so large that it is already better to build the products on our own platform, which we know and which is tested and works. Unless there is a special value."

How do you explain the technological gap that you say you have foundf? "We are a technology company. Both Daniel and I came from a technology background, not insurance, and first of all, when we founded the company, we brought in engineers to write code. All insurance companies in the world are based on software that they buy from external suppliers. These are tools designed for insurance agents, a completely different world from a world where you build everything from scratch to be autonomous and pay claims in seconds without human contact. It's like comparing Israeli television channels 30 years ago to today's Netflix. It's not the same language at all, even if we add another million customers to Netflix or Lemonade, it won't affect the number of employees - and that's dramatic."

Published by Globes, Israel business news - en.globes.co.il - on June 9, 2025.

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