Mid-cap stocks often strike the right balance between having proven business models and market opportunities that can support $100 billion corporations. However, they face intense competition from scaled industry giants and can be disrupted by new innovative players vying for a slice of the pie.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three mid-cap stocks to pass on and some alternatives you should look into instead.
Zoom (ZM)
Market Cap: $27.69 billion
Once the verb that defined remote work during the pandemic ("let's Zoom later"), Zoom (NASDAQ: ZM) provides a cloud-based platform for video meetings, phone calls, team chat, and collaboration tools that helps businesses and individuals connect virtually.
Why Are We Bearish on ZM?
- Average ARR growth of 5% over the last year has disappointed, suggesting it’s had a hard time winning long-term deals and renewals
- Customers have churned over the last year due to the commoditized nature of its software, as reflected in its 98.5% net revenue retention rate
- Anticipated sales growth of 3.9% for the next year implies demand will be shaky
Zoom’s stock price of $95.54 implies a valuation ratio of 5.6x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ZM.
Semtech (SMTC)
Market Cap: $12.34 billion
A public company since the late 1960s, Semtech (NASDAQ: SMTC) is a provider of analog and mixed-signal semiconductors used for Internet of Things systems and cloud connectivity.
Why Is SMTC Not Exciting?
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 16 percentage points
- 10.6 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Negative returns on capital show management lost money while trying to expand the business
At $131.60 per share, Semtech trades at 26.9x forward P/E. To fully understand why you should be careful with SMTC, check out our full research report (it’s free).
Fiserv (FISV)
Market Cap: $27.48 billion
Powering over 1 billion accounts and processing more than 12,000 financial transactions per second globally, Fiserv (NASDAQ: FISV) provides payment processing and financial technology solutions that enable merchants, banks, and credit unions to accept payments and manage financial transactions.
Why Do We Pass on FISV?
- The company has faced growth challenges as its 2.5% annual revenue increases over the last two years fell short of other financials companies
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 3.1% annually
- ROE of 9.9% reflects management’s challenges in identifying attractive investment opportunities
Fiserv is trading at $51.80 per share, or 7.2x forward P/E. Read our free research report to see why you should think twice about including FISV in your portfolio.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
