Chicago, IL – February 20, 2025 – Zacks Equity Research shares Palomar Holdings PLMR as the Bull of the Day and Diageo DEO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Super Micro Computer, Inc. SMCI and NVIDIA Corp. NVDA.
Here is a synopsis of all four stocks.
In an investing world dominated by AI hype, unprofitable hyper-growth companies, and growing market uncertainty, it can be refreshing to buy stock in a simple, steadily growing business with a proven track record. Palomar Holdings is a specialty insurance provider that operates in a sector often overlooked by investors chasing the latest high-flying tech stocks.
No, insurance is not the most exciting or flashy industry, but it quietly boasts one of the most resilient and advantaged business models out there. With strong unit economics, predictable cash flows, and a product that remains essential regardless of market cycles, well-run insurers can be long-term wealth creators.
Palomar stands out with its top Zacks Rank, impressive growth forecasts, reasonable valuation, and strong price momentum, making it a compelling stock to consider in today’s market.
Palomar Holdings boasts exceptional business metrics that highlight its strong growth trajectory and powerful business model. The company is expected to deliver 33.6% revenue growth this year, followed by another 22.1% increase next year. On the bottom line, earnings are projected to climb 25% this year and another 18.3% next year, reflecting both operational efficiency and disciplined underwriting.
Beyond its impressive top- and bottom-line growth, Palomar also benefits from expanding profitability, with net margins currently sitting at 21.1% and trending higher.
Further solidifying its fundamental strength, analysts have been consistently raising earnings estimates for the past year, signaling increasing confidence in Palomar’s business prospects. Over the last two months alone, estimates have risen across multiple timeframes, helping Palomar secure a coveted Zacks Rank #1 (Strong Buy) rating. This sustained upward trend in earnings expectations suggests continued momentum and a favorable outlook for investors.
In addition to its impressive growth forecasts and solid business model, PLMR stock price action indicates higher prices may be imminent. After gapping significantly higher following its recent quarterly earnings report, the stock has been consolidating and forming a compelling bull flag. As the company continues to put up a truly impressive performance, it seems that more and more investors are accumulating shares, and I would not be surprised to see PLMR stock break higher in the near future.
Palomar is currently trading at 22.9x forward earnings, which is below the industry average of 29.8x. The company is also growing faster than the average company in the industry and its stock price is considerably outperforming the industry and sector. These factors together make PLMR’s valuation quite attractive.
Palomar Holdings presents a compelling investment opportunity due to its strong growth trajectory, robust business model, and favorable valuation, distinguishing itself in a market often focused on more volatile sectors. With impressive revenue and earnings growth forecasts, alongside a top Zacks Rank, PLMR is well-positioned for continued success, making it an attractive option for investors seeking stability and long-term wealth creation.
Diageo, the global spirits giant behind brands like Johnnie Walker, Guinness, and Tanqueray, has been struggling to keep up with the market. Compounding the challenges, Diageo's stagnant sales growth over the past three years raises serious concerns.
Additionally, the company has declining earnings estimates over the last year, indicating continued bearishness from analysts and giving it a Zacks Rank #5 (Strong Sell) rating. DEO stock has significantly underperformed both its industry peers and the broader market, raising alarms about its near-term prospects.
Diageo’s revenue growth has remained sluggish over the past few years, struggling to gain momentum. As shown in the revenue chart, sales have hovered within a narrow range, with no significant growth since 2021. This stagnation is concerning, particularly for a company that relies on premium branding and global expansion to drive revenue.
The weak top-line performance is now reflected in Diageo’s earnings outlook. Analysts have unanimously lowered earnings expectations for both this year and next year. Estimates for this year decreased by 4.2% and 3.5% the next year.
With falling earnings estimates and a stock price that continues to underperform, Diageo appears to be facing structural challenges that are likely to limit its upside potential in the near term.
One of the biggest headwinds facing Diageo is the changing drinking habits of younger consumers. Simply put, young people are drinking less than previous generations, posing a long-term challenge for alcohol producers.
A 2023 Gallup survey highlights this shift, showing that the percentage of adults under 35 who say they drink alcohol has declined from 72% in 2001-2003 to just 62% in 2021-2023. This drop reflects broader lifestyle changes, with younger generations placing a higher emphasis on health and wellness, as well as a greater willingness to experiment with alcohol-free alternatives.
With stagnant sales growth, declining earnings estimates, and shifting consumer trends working against it, Diageo faces significant challenges in the near term. The company’s premium branding has historically been a strength, but younger consumers’ changing drinking habits and increased competition from non-alcoholic alternatives could weigh on long-term growth.
Until Diageo can reignite sales growth or show a reversal in earnings trends, investors may want to steer clear of DEO stock and look for stronger opportunities elsewhere.
Super Micro Computer, Inc.’s shares have bounced back strongly this year after a weak performance last year. The recent business update has boosted momentum, with investors anticipating no hiccups in the company’s highly-anticipated 10-K filing.
Is now a good time to bet on the Supermicro stock, or should a wait-and-see approach be considered? Let’s find out –
A plethora of discouraging news impacted the Supermicro stock last year. Supermicro was allegedly involved in accounting violations, per a short seller. The DOJ also investigated Supermicro for accounting irregularities.
Supermicro received a non-compliance letter from the Nasdaq, raising the chances of being de-listed from the tech-heavy index. The situation worsened when Supermicro announced a delay in filing its annual 10-K report.
Things are looking brighter for Supermicro this year as management aims to publish last fiscal year’s 10-K report before Feb. 25. Supermicro’s previous auditor, Ernst & Young, resigned due to management disputes. However, the company now works with reputed accounting firm BDO, ensuring timely SEC report filings.
Supermicro’s encouraging 2026 revenue growth estimates also boosted the stock price. Supermicro CEO Charles Liang expects revenues of $40 billion next year, way above the current consensus of $29.2 billion. The demand for Supermicro’s direct-liquid cooling technology is set to spike next year due to data centers’ heat issues and likely boost sales.
The Supermicro stock has soared 83.5% year to date, breezing past the Computer- Storage Devices industry’s gain of 17.3%. The Supermicro stock is now one of the top-performing stocks on the S&P 500, with its shares trading above the 50-day short-term moving average, indicating an imminent uptrend.
Considering the robust revenue growth and the expected prompt 10-K filings, it is advisable to hold Supermicro stock for gains in the long run. And why not? Supermicro’s synergy with NVIDIA Corp. through the Blackwell platform has boosted its artificial intelligence (AI) computing power, trimmed operational expenses, and strengthened its market position.
Supermicro also uses energy-efficient technologies in operations, a boon once global environmental regulations tighten. Moreover, Supermicro’s return on equity of 34% is higher than the industry’s 23%, signifying strong profitability.
At the same time, the Supermicro stock remains reasonably priced. This is because, per the price/earnings ratio, SMCI trades at 20.3X forward earnings. In comparison, the industry’s forward earnings multiple is 22.05.
However, skeptics doubting Supermicro’s growth story may prefer to wait until Feb. 25 for a better financial insight before betting on the SMCI stock. For now, SMCI stock has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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