Palomar To Buy Back $40M In Stock; Shares Gain After-Hours

Shares of Palomar Holdings rose 5.3% in Monday’s extended trading session after the insurance company announced a stock repurchase program of up to $40 million, which it intends to fund from its current cash balance.

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The repurchase program will commence on March 31 and will be completed over the next two years.

Palomar (PLMR) CEO Mac Armstrong said, “The Board’s authorization of the share repurchase program allows Palomar to opportunistically deploy our capital in an accretive fashion and ultimately drive long-term value creation for our shareholders. The selective repurchase of shares at values we believe are depressed will not impact our ability to maintain our strong long-term growth trajectory.”

“We remain very confident that our 2021 premium growth rate will be at a level similar to that of 2020 as well as in our ability to achieve the previously announced adjusted net income guidance of $62 to $67 million for the calendar year 2021,” Armstrong added. (See Palomar stock analysis on TipRanks)

Last month, Palomar reported 4Q results. The company incurred an adjusted loss of $0.05 in 4Q, compared to $0.00 per share estimated by analysts. Adjusted earnings of $0.48 per share were recorded in the same quarter last year. Net written premiums decreased 3.5% to $42.3 million.

On March 26, Barclays analyst Tracy Benguigui upgraded the stock to Buy from Hold and maintained a price target of $94 (42.7% upside potential). In a note to investors, Benguigui said that the recent sell-off is unjustified.

According to the analyst, Palomar’s recent underperformance was mainly due to “extreme negative sentiment” surrounding the company’s catastrophic losses recorded in 1Q.

Furthermore, Benguigui argues the recent sell-off is a “potentially appealing opportunity for investors willing to stomach near-term volatility in the pursuit of long-term gains.”

The consensus rating among analysts is a Strong Buy based on 4 unanimous Buys. The average analyst price target stands at $101.50 and implies upside potential of 54% to current levels over the next 12 months. Shares have gained 11.2% over the past year.