Lemonade's (LMND) target to expand in-force premiums to $10 billion from $1 billion and reach net profit by the end of 2027 is notably optimistic compared with expectations, Morgan Stanley said in a note Wednesday.

"The most important element of the investor day for us was the goal to achieve net profit exiting 2027, which is significantly better than consensus and our expectations," the firm said.

Lemonade also set up an "ambitious" goal of growing its business to $10 billion in premiums from $1 billion over the next few years, Morgan Stanley said.

The company revised its 2025 and multi-year financial targets, projecting a 30% compound annual growth rate for in-force premiums and $2 billion in IFP by 2027, according to the note.

Morgan Stanley said that the company's focus on younger demographics and cross-selling opportunities in auto insurance supports growth and the current 700,000-person waitlist underscores demand.

The company's reliance on AI for customer interactions and claims handling minimizes operating costs and its employee headcount grew by only 2% annually despite a 25% CAGR in IFP since 2021, the firm added.

Morgan Stanley updated its rating on Lemonade's stock to equal weight from under weight and raised its price target to $42 from $23.

Shares of the company jumped 10% in recent trading.

Price: 44.27, Change: +4.13, Percent Change: +10.29