In this article, we discuss the 7 best NASDAQ stocks under $5 along with the latest updates around the market.

Job Market Cools Yet Economists Remain Optimistic About Stability

A Yahoo Finance report on September 28 reveals that consumers are beginning to feel the effects of a cooling labor market, according to the latest Consumer Confidence Index, which shows a narrowing gap between those finding jobs plentiful and those finding them hard to get.

Economist Stephanie Guichard noted that this shift is not unexpected given the recent rise in the unemployment rate to 4.2% and a drop in job openings. While the labor market has cooled compared to 2022, Guichard suggested that it remains strong, with consumers reacting to the change from a previously “super hot” market.

Despite the labor market’s slowdown, Fed Chair Jerome Powell expressed confidence in the economy, noting its solid growth, decreasing inflation, and strong labor market. While economists acknowledge signs of a slowdown, they agree the labor market isn’t in bad shape yet.

Key Driver of the Economy

AI was the key driver for the economy and helped recover the market after the huge market downturns of 2022. In one of our February articles, 11 Cheap AI Stocks to Buy in 2024, we discussed how the AI stocks kept the broader market afloat. Here is an excerpt from the article:

“The AI stocks also performed quite well in 2023 and are still trending in 2024. The Magnificent 7 stocks outperformed the rest of the S&P 493 heavily in the year, and analysts like Goldman Sachs’ David Kostin are positive that the gains will continue in 2024. The seven big tech stocks, including Meta Platforms, NVIDIA, which were the top performers of the group, collectively gained around 75% during the previous year compared to 12% gains for the rest of the 493 stocks in the S&P 500 index.”

While we are seeing a broadening out in the market from the tech stocks that benefitted due to the AI theme, the industry’s strong momentum is still expected to be at a steady pace, especially after the rate cuts. While AI technology fueled tech sector growth, it is also helping other sectors grow significantly.

In a September 27 interview with CNBC, Bain & Company’s head of global technology practice, Anne Hoecker discussed the growing use of generative AI in businesses and noted that while it is still in the early stages, significant progress is being made.

AI is driving notable cost savings, such as 20-30% in customer service and call centers, 30-50% in content creation and marketing, and improvements in software development and back-office functions.

Companies are transitioning from small pilot projects to scaling larger initiatives that will further improve productivity. Hoecker identified key drivers behind the anticipated billion-dollar AI market, including hyper scalers, enterprise-level AI models, and AI integration into everyday software products.

Although concerns about AI replacing jobs persist, Hoecker suggested that AI will also create new opportunities and roles as businesses innovate, with a focus on upskilling workers and building the necessary digital infrastructure to support these advancements.

With that, we look at the 7 Best NASDAQ Stocks Under $5.

Our Methodology

For this article, we used the Yahoo Finance stock screener to identify nearly 80 stocks listed on NASDAQ with over 20% year-over-year revenue growth and share price under $5 as of September 27. Next, we narrowed our list to 7 stocks most widely held by institutional investors. The stocks are listed in ascending order of their hedge fund sentiment.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

7 Best NASDAQ Stocks Under $5

7. Taysha Gene Therapies, Inc. (NASDAQ:TSHA)

Stock Price as of September 27: $2.07

Number of Hedge Fund Holders: 21

Taysha Gene Therapies, Inc. (NASDAQ:TSHA) is a dynamic gene therapy company dedicated to creating innovative treatments for rare genetic disorders affecting the central nervous system. Founded in 2020, it aims to transform the landscape of healthcare by addressing significant unmet medical needs, particularly in conditions such as Rett syndrome and Giant Axonal Neuropathy (GAN).

It has a focus on adeno-associated virus-based gene therapies and is working to develop solutions that target the genetic root causes of these diseases. The lead product candidate, TSHA-102, is currently in clinical trials specifically designed for the treatment of Rett syndrome, a condition that currently lacks approved therapies aimed at its underlying genetic causes.

The company’s focus highlights the urgency of its mission and the potential for meaningful advancements in patient care. The company’s commitment to addressing rare genetic disorders positions it uniquely within the biotech industry, as these conditions often receive less attention and funding.

According to Insider Monkey’s database, 21 hedge funds held stakes in Taysha Gene (NASDAQ:TSHA) in the second quarter, with positions worth $119.850 million. With 18,65 million shares of the company, valued at $41.776 million, VenBio Select Advisor is the largest shareholder of the company, as of June 30.

For the second quarter, Taysha Gene (NASDAQ:TSHA) reported a GAAP EPS of -$0.09, which slightly surpassed analyst expectations by $0.01, along with revenues of $1.12 million. Taking its place on our list of the best NASDAQ stocks under $5, it has a Strong Buy rating from 11 analysts and its average price target of $7.00 implies an upside of 238.16%, as of September 27.

Lastly, as of June 30, 2024, it had a cash position of $172.7 million, which is projected to support the company’s operating expenses and capital needs well into the fourth quarter of 2026.

6. Standard BioTools Inc. (NASDAQ:LAB)

Stock Price as of September 27: $1.92

Number of Hedge Fund Holders: 23

One of the best NASDAQ stocks under $5 on our list, Standard BioTools Inc. (NASDAQ:LAB), previously known as Fluidigm Corporation, is a company dedicated to advancing scientific research and clinical diagnostics through cutting-edge instruments and services.

It operates globally across the Americas, Europe, the Middle East, Africa, and Asia Pacific and focuses on two main segments, Proteomics and Genomics. Through its expertise in mass cytometry and high-throughput genomics, it offers a diverse range of products, including integrated fluidic circuits, assays, reagents, and analytical instruments, all focus on improving research capabilities in clinical laboratories, biopharmaceuticals, and academic institutions.

The recent merger with SomaLogic marks a significant development for Standard BioTools (NASDAQ:LAB), as it moves forward in the multi-omics space. The merger advances the product offerings by integrating advanced multi-omic tools, especially the SomaScan assay, which enables the simultaneous analysis of thousands of protein biomarkers.

Management has mentioned that the partnership with Illumina is particularly noteworthy, as it aims to fully commercialize the SomaScan assay on Illumina’s NovaSeq platform by the first half of 2025.

The platform is already widely utilized, with an installed base of approximately 2,200 instruments, which provide researchers with the means to conduct comprehensive multi-omic studies that blend genomic and proteomic data.

In its latest earnings call, management highlighted a keen focus on optimizing the cost structure and expediting synergies following the merger with SomaLogic. The company has accelerated its target for an $80 million cost reduction to the end of 2024, a year ahead of schedule.

The efficiency is critical as the company aims for breakeven adjusted EBITDA by the end of 2026. With nearly $400 million in cash reserves, it is well-capitalized to pursue its vision of becoming a profitable leader in the multi-omics life sciences market.