Lemonade drops after Morgan Stanley turns bearish on increasingly competitive auto insurance market

Shares of Lemonade LMND.N down 6.5% to $26.28 in early afternoon trading on Tues after Morgan Stanley downgraded to 'underweight' from 'equal-weight' pointing to more difficult macro environment

LMND shares extend losses and set to drop for fourth straight session as broader equities surrender early gains .N

Morgan Stanley slashed PT by $11 to $24

Co could see higher loss costs, portion of a premium allocated to cover actual losses, due to tariffs as it seeks to expand into a more competitive and uncertain auto insurance market, Morgan Stanley says in note to clients

While LMND has made progress toward profitability, co is still "several years away" from reporting positive GAAP net income, Morgan Stanley says, adding it believes the stock will be a relative underperformer to other P&C peers

At its investor day in Nov, LMND charted plan to grow its business tenfold to $10 bln in premiums over the next few years, with auto insurance as a key driver

Of 10 brokerages covering LMND, recommendation breakdown is 1 "buy", 5 "hold", 3 "sell" and 1 "strong sell" and their median PT is $25, LSEG data shows

With move on Tues, stock down ~28% YTD and has roughly halved from its 1-yr high of $53.85 hit on Nov 25