We recently explored 8 best small cap stocks that are ready to explode according to analysts. You can check out the free list here.
Bitfarms Ltd. (NASDAQ:BITF) tops our list of the 8 Best Small-Cap Stocks Ready to Explode According to Analysts. Click here to read also about the other 7 stocks.
Small-cap stocks are companies that have a market capitalization falling between $300 million and $2 billion.
We’ve often seen these smaller enterprises outshined by their large-cap counterparts, also because stocks like Google, Apple, Amazon etc. are known for their power to move entire markets. But it doesn’t mean that these small-cap stocks cannot present some golden opportunities for investment.
Small-cap stocks started gaining momentum during the last quarter of 2023, driven primarily by the AI-led rally that pushed the entire stock market high, thus putting away any immediate worries of an upcoming recession. The long-term prospects of these smaller companies don’t look bleak either. According to Julius Baer, a private banking company based in Zurich, small-cap stocks have proven to, in fact, even outperform their larger-cap counterparts over very long periods. The report mentions that a dollar invested in US large-caps in 1926 grew in value to $5,767 by the end of 2018. Meanwhile, a single dollar invested in small-caps instead would have been worth a whopping $38,842 – almost seven times more.
However, what really makes these stocks attractive to investors is their potential for high returns. We will much more often see companies doubling their market capitalization from $1 billion to $2 billion, than let’s say from $1 trillion to $2 trillion. Small-caps tend to be fast-growing companies that can take more chances and respond to events and trends more efficiently than larger companies. Moreover, a recent analysis by MorningStar has revealed that small-caps look cheaper now relative to the broad market than at any time in the last 20 years.
But, of course, higher returns come with higher risks. Small-caps are highly vulnerable to macroeconomic factors and are thus more prone to market fluctuations, simply because they don’t possess the same financial power as larger corporations, making it hard for them to survive unexpected emergencies. Additionally, these companies often have fewer outstanding shares, can’t borrow money as easily as bigger companies, and are more likely to have negative cash flows, leading to them paying lower or no dividends. They are also usually covered by fewer analysts and thus come with limited transparency and data for individual investors.
According to Marcio Silveira, a CFP, former equity analyst, and owner of Silvergreen Sustainable Investments:
“Since the 2010s, we’ve had some changes in how the economy works. All the top companies are tech companies now, and small-caps are underperforming because they can’t compete with these mega winner-take-all companies. You can find great opportunities in individual small-cap stocks, but you need to do a lot of fundamental analysis to find the hidden gems.”
Bitfarms Ltd. (NASDAQ:BITF)
Upside Potential as of May 21st: 133.79%
Market Cap: $689.4 million
Founded in 2017, Bitfarms Ltd. (NASDAQ:BITF) is a global Bitcoin mining company, running vertically integrated mining operations with onsite technical repair, proprietary data analytics, and company-owned electrical engineering and installation services to deliver high operational performance and uptime.
Shares of Bitfarms Ltd. (NASDAQ:BITF) were held by 10 hedge funds at the end of Q4 2023, with a collective stake value of around $38.29 million. The largest stake of over 4.7 million shares was held by Millennium Management, valued at $10.64 million.
Bitfarms reported a revenue of $50 million in Q1 2024, up 9% QoQ and 67% YoY. The Toronto-based company also secured an additional 24,000 miners in March, increasing total delivery to 88,000 in 2024. The analysts have maintained a Strong Buy position on BITF with an upside potential of 133.79%. The stock has also gained over 88% in the past year, as of the close of May 24th, making it the Best Small-Cap Stock to Buy in our list.
Bitfarms Ltd. is associated with Bitcoin, the largest cryptocurrency in the world with a market cap exceeding $1.3 trillion as of the 25th of March 2024. After a bearish couple of years, Bitcoin has recently ballooned in value, hitting an all-time high of $73,777 in March.
Bitfarms Ltd. (NASDAQ:BITF) ranks 1st in our list. To check out the full free list, visit 8 Best Small-Cap Stocks Ready to Explode According to Analysts.
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Disclosure: none. This article is originally published at Insider Monkey.