In this article, we will take a look at the 10 cheap small-cap stocks to buy before the next breakout. If you want to see more stocks in this selection, go to the 5 Cheap Small-Cap Stocks to Buy Before the Next Breakout.
Some of the prominent large and mega-cap stocks in the world today used to be small-cap companies at one point. For instance, the Austin, Texas-based electric vehicle (EV) company Tesla, Inc. (NASDAQ:TSLA) had a market capitalization of less than $1 billion back in 2010, and the share price stood around $1 level if adjusted for the stock splits. Currently, the share price of the Elon Musk-led entity is hovering around the $195 level. Although mega and large-cap companies are known for providing stability to investors, they do not offer the same upside potential as some of the best small-cap stocks. However, this does not mean that all small-cap companies will expand to become mega-cap corporations. A keen analysis is required to identify the stocks that have the potential to become large-cap stocks when the next market breakout takes place.
Experts believe that for a breakout to take place, the US economy needs to find a solid footing. This is tricky as the inflation level is raging around a multi-decade high, and the Federal Reserve is increasing benchmark interest rates. However, the US Central bank needs to find a balance between controlling inflation and raising interest rates, as increasing interest rates dampen demand and could trigger a recession. According to a poll conducted by Reuters, the S&P 500 Index is expected to end 2023 at around 4,200 points level. This would signify an increase of 6% from the current levels. In case of a breakout, some of the best small-cap stocks like Innoviz Technologies Ltd. (NASDAQ:INVZ), Clover Health Investments, Corp. (NASDAQ:CLOV), and Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) could yield substantial returns for investors as these companies are well-positioned to benefit from the emerging trends and an increase in demand.
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Our Methodology
We have shortlisted 10 stocks with strong business fundamentals and growth prospects in line with the new trends across different industries. The market capitalization of all these stocks falls in the range of $300 million to $2 billion. Furthermore, these stocks are also trading at less than $10 as of December 7. Inside Monkey’s database of 920 hedge funds has been used to rank the best small-cap stocks according to the level of hedge fund ownership as of Q3 2022.
Cheap Small-Cap Stocks to Buy Before the Next Breakout
10. Sorrento Therapeutics, Inc. (NASDAQ:SRNE)
Number of Hedge Fund Holders: 10
Share Price as of December 7: $1.30
Sorrento Therapeutics, Inc. (NASDAQ:SRNE) is a San Diego, California-based biotech company developing treatments for cancer, intractable pain, and COVID-19. The company has eight manufacturing sites, five in the US and three in China.
In a research note issued to investors on November 2, Brandon Folkes at Cantor Fitzgerald started coverage on Sorrento Therapeutics, Inc. (NASDAQ:SRNE) with a target price of $5 and assigned the stock an Overweight rating. The target price reflects a handsome upside potential of 284% from the closing price as of December 7. In August, the drug candidate SP-103 from Scilex, Sorrento Therapeutics, Inc.’s (NASDAQ:SRNE) majority-owned subsidiary, was given fast-track status by the U.S. Food and Drug Administration (FDA). The drug is targeted toward the treatment of severe low back pain (LBP).
Folkes believes that Sorrento Therapeutics, Inc. (NASDAQ:SRNE) has the ability to develop multiple best-in-class products in high-value fields of oncology, non-opioid pain relief, and infectious diseases like COVID-19. Experts think Sorrento Therapeutics, Inc. (NASDAQ:SRNE) is trading at a significant valuation discount compared to its rivals, making it one of the best small-cap stocks to invest in.
9. Amyris, Inc. (NASDAQ:AMRS)
Number of Hedge Fund Holders: 11
Share Price as of December 7: $1.73
Amyris, Inc. (NASDAQ:AMRS) is an Emeryville, California-based sustainable biotechnology and renewable chemical corporation founded in 2003. The company has developed and commercialized 13 key ingredients based on this technology.
On November 10, Steve Mah at Cowen assigned Amyris, Inc. (NASDAQ:AMRS) stock a target price of $6 and maintained an Outperform rating on the stock. The analyst highlighted that the company is focusing on investing in brands that have a strong growth and profitability outlook. With 25 molecules in progress, the company’s sizable research and development (R&D) pipeline will produce 5–6 new molecules each year, adding to the pool of exclusive candidates that Amyris, Inc. (NASDAQ:AMRS) can promote to both current and potential industry partners. The company is considered among the best small-cap stocks due to its strong R&D pipeline.
Amyris, Inc. (NASDAQ:AMRS) intends to reach annual revenue of $1 billion by 2025. The company also revealed that it posted record sales during 2022 Black Friday from the direct-to-customer (DTC) channel. Amyris, Inc.’s (NASDAQ:AMRS) flagship anti-aging and vegan skin product, Biossance, generated first-month sales of $20 million through retail stores and the Chinese Single’s day sale in November. The company’s DTC channel generated 76% of the revenue during the last month.
8. AST SpaceMobile, Inc. (NASDAQ:ASTS)
Number of Hedge Fund Holders: 8
Share Price as of December 7: $5.77
AST SpaceMobile, Inc. (NASDAQ:ASTS) is a Midland, Texas-based company involved in the designing and manufacturing of satellites. The company’s BlueWalker 3 satellite has the distinction of being the biggest commercial communications array present in the low orbit of the Earth. The satellite was launched on September 10.
On November 23, Bryan Kraft at Deutsche Bank increased the price target on AST SpaceMobile, Inc. (NASDAQ:ASTS) from $30 to $32 and maintained a Buy rating on the stock. The analyst highlighted that the company had made significant progress in the past few months as it launched its first satellite and successfully installed the biggest commercial communications array in the low orbit of the Earth. Based on these developments, Kraft thinks that the technology risk associated with the business has been reduced due to the presence of proof of concept. Moving forward, AST SpaceMobile, Inc. (NASDAQ:ASTS) intends to launch five BlueBird satellites by the end of next year. The company’s robust expansion plans make it one of the best small-cap stocks to buy.
Point72 Asset Management raised its stake in AST SpaceMobile, Inc. (NASDAQ:ASTS) by 50% during Q3 2022.
7. Taboola.com Ltd. (NASDAQ:TBLA)
Number of Hedge Fund Holders: 20
Share Price as of December 7: $2.78
Taboola.com Ltd. (NASDAQ:TBLA) is a New York-based AI-powered advertising agency company that leverages the power of the Taboola discovery platform to promote content to the audience. The advertisement platform has over 500 million daily active users (DAUs) and 15,000 advertisers as of 2022.
On November 30, the company entered into a three-decade exclusive deal with Yahoo. The deal will allow Taboola.com Ltd. (NASDAQ:TBLA) to become the only advertising platform across all digital properties of Yahoo. The deal will aid Taboola.com Ltd. (NASDAQ:TBLA) to reach 900 million monthly active users (DAUs) through the Yahoo platform. In exchange, Yahoo will receive a stake of almost 25% in the company. In a note issued to investors on November 10, John Blackedge at Cowen assigned Taboola.com Ltd. (NASDAQ:TBLA) a target price of $5 and reiterated an Outperform rating on the stock. The analyst highlighted that the revenue guidance for Q4 2022 was softer than the consensus forecast due to the weakness in the advertisement market.
Taboola.com Ltd. (NASDAQ:TBLA) has also completed a significant acquisition in its brief time as a public company. The company announced in September 2021 that it would buy Connexity, one of the leading e-commerce media platforms. In addition to paying around $593.9 million in cash, the corporation issued 17 million shares valued at $157.7 million to finalize the purchase. With the acquisition of Connexity, Taboola.com Ltd. (NASDAQ:TBLA) has expanded its product line to include e-commerce-focused content and publisher monetization. Taboola’s clients can now add more than 500 million item listings to their online properties, generating new revenue streams and increasing platform user engagement.
6. WeWork Inc. (NYSE:WE)
Number of Hedge Fund Holders: 20
Share Price as of December 7: $2.76
WeWork Inc. (NYSE:WE) is a New York-based company that provides physical and virtual coworking spaces. The company provides flexible terms and hybrid solutions, which are ideal for growing startups. The company has been able to stage a strong recovery following the ease of the COVID-19 pandemic that has encouraged people to return to working spaces.
On November 4, Thomas Catherwood at BTIG commenced coverage on WeWork Inc. (NYSE:WE) stock with a target price of $7.50 and a Buy rating. The analyst anticipates a strong outlook in demand for flexible workplaces in the medium and long term. This will improve the cash flow generation ability of the company, which will aid it in repaying short-term maturities of debt.
WeWork Inc. (NYSE:WE) has already secured contracts with remote employees, which are set to sustain a reasonably consistent revenue stream in the long run. The company is now working on expanding its margins through incremental price increases, better facilities, and reduction in certain costs. WeWork Inc. (NYSE:WE) achieved this goal in Q3 2022, with its revenue increasing to $815 million from $593 million while the selling, general and administrative expenses decreased by $86 million.
In addition to WeWork Inc. (NYSE:WE), Innoviz Technologies Ltd. (NASDAQ:INVZ), Clover Health Investments, Corp. (NASDAQ:CLOV), and Iovance Biotherapeutics, Inc. (NASDAQ:IOVA) are also considered some of the best small-cap stocks to buy currently.
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Disclosure: None. 10 Cheap Small-Cap Stocks to Buy Before the Next Breakout is originally published on Insider Monkey.
