In this article, we’ll list the top 10 small-cap stocks with the highest upside potential.
Small-cap stocks are companies with a market capitalization of somewhere between $250 million and $2 billion. They are usually the new and the world’s up-and-coming companies.
Most giant companies start as small-cap, but by continuously developing and growing their earnings, their share price increases making them large or mega-cap companies, and along the way smart investors that took the risk with proper research and analysis reap the profits.
As mentioned in one of our previous articles i.e. 8 best small-cap stocks according to analysts, a report from Julius Baer, a private banking company based in Zurich, explains how small-cap stocks have proved to outperform over very long periods. The report states that a single dollar invested in the US large caps in 1926 grew in value to $5,767 by the end of 2018. But, a dollar invested in small caps would have been worth almost seven times more at $38,842.
As with anything else, investing in small-cap stocks comes with its benefits and drawbacks. Small-cap companies have a high potential for growth and their shares aren’t necessarily too expensive, investors can make a lot of profit with the rapid growth in share prices of these up-and-coming companies. Moreover, according to a recent analysis posted by MorningStar, Small caps look cheaper now relative to the broad market than at any time in the last 20 years. But these high returns often come with high risk, small-cap stocks are vulnerable to economic fluctuations because they don’t possess the financial power and stability as the large-cap companies.
A smart investor maintains a portfolio of several small-cap stocks with rapid growth potential and some large-cap stocks for their stability against market fluctuations. Small-cap stocks are gaining popularity among Wall Street analysts in 2024 especially in the healthcare sector because of their new therapeutic innovation and high-returns potential.
J.P. Morgan Asset Management’s Long-Term Capital Market Assumptions (LTCMAs) expect the US large-cap stocks to generate a +7.0% annualized return over the next 10 to 15 years compared to the +7.6% annualized returns expected for the mid-cap and small-cap. The private bank believes that building a portfolio of attractively valued, high-quality small-cap stocks can generate potent long-term returns while mitigating some risks.
According to Thomas Lee, the head of research and the co-founder of Fundstrat Global Advisors, there is a 50% upside for small-cap stocks in 2024. Lee stated, “You may be surprised, but small-caps have a faster revenue growth. Lee also highlighted the small-caps’ earnings growth potential, projecting a 19% growth in EPS, outpacing the S&P 500’s 12% projected YoY EPS growth for 2024.
Moreover, the Fundstrat’s CEO pointed out that the institutional investors have been dumping the small caps lately, making them ripe for a turnaround trade. Lee indicated that the current conditions of small-cap stocks are shaping up to be a mirror image of the situation in 1999 when the sector went on a streak of outperformance that lasted more than a decade. “In 1999, this was also the same launch point for 12 years of outperformance. From 1999 to 2011, small caps outperformed by 650bp annually and a cumulative 113%.”
Warren Buffet while discussing small-cap stocks said:
“If I was running $1 million today, or $10 million for that matter, I’d be fully invested. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50 percent a year on $1 million. The universe I can’t play in has become more attractive than the universe I can play in. I have to look for elephants. It may be that the elephants are not as attractive as the mosquitoes. But that is the universe I must live in.”
As of June 2024, almost 1600 small-cap stocks are being traded in the US stock exchanges, so to help our readers diversify their portfolios, we have filtered out the top 10 small-cap stocks with upside potential.
Stocks
Methodology
To collect data for this article, we used a stock screener and filtered the stocks with the current market cap between $250 million and $2 billion. To shortlist these 10 stocks, we took the small-cap stocks with an upside potential of over 50% backed by at least 11 or more Wall Street analysts’ price targets as of June 15th, 2024, and ranked them accordingly. Here are the top 10 small-cap stocks to buy according to analysts.
10. Accolade Inc. (NASDAQ:ACCD)
Upside potential as of June 15th, 2024: 120.93%
Market Cap: $505.40 million
Accolade Inc. (NASDAQ:ACCD), a subsidiary of Wendel SE, is a Pennsylvania-based healthcare technology. The company provides a personalized healthcare approach to its customers, including care delivery, navigation, and advocacy services through its platforms such as Accolade Care, Accolade Expert MD, Accolade Connect, Accolade Plus, etc.
The company reported a revenue of $414.29 million in 2023, a year-over-year increase of 14.09%. Meanwhile, $99.16 million out of the gross profit of $192.06 million was spent in research and development in 2023 signaling towards more innovative healthcare services in the future.
Wall Street analysts have maintained a Buy rating on the stock. The 12 analysts with a 12-month price forecast for Accolade stock have an average target of $14.25 with a low estimate of $10 and a high estimate of $18. The average target predicts an increase of 120.93% from the current stock price of $6.45.
At the end of the Q4 of the company’s fiscal year, Accolade Inc. (NASDAQ:ACCD) was held by 16 hedge funds in the insider monkey database, with Deerfield Management holding the largest stake of 132,598,000 shares valued at $117.48 million.
9. Editas Medicine, Inc. (NASDAQ:EDIT)
Upside potential as of June 15th, 2024: 134.97%
Market Cap: $451.49 million
Repairing broken genes is how Editas Medicine, Inc.(NASDAQ:EDIT) likes to describe itself. The biotechnology company is focused on translating the power of CRISPR gene editing systems to develop a robust pipeline of medicines to cure people with serious diseases around the globe.
The Massachusetts-based company reported a revenue of $78.12 million in 2023, with a whopping increase of 296.32% from the $19.71 million reported in the previous year. This $58.4 million increase can be attributed to the payments received under their license agreement with Vertex Pharmaceuticals. The 11 analysts with a 12-month price forecast for Editas Medicine, Inc. (NASDAQ:EDIT) have a price target of $12.9 with a low estimate of $7 and a high estimate of $20. The average price target predicts an increase of 134.97% from the current stock price of $5.49. Wall Street analysts have maintained a consensus Buy rating on this stock. The analysts believe that this stock is likely to outperform the market over the next 12 months.
Out of the 21 hedge funds, holding Editas Medicine, Inc. (NASDAQ:EDIT) in the Q1 of 2024, in the Insider Monkey database, Deep Track Capital holds the largest chunk of 5,527,290 shares, valued at $41.01 million.
8. Arvinas, Inc. (NASDAQ:ARVN)
Upside potential as of June 15th, 2024: 141.06%
Market Cap: $1.81 billion
Arvinas, Inc. (NASDAQ:ARVN) is a biopharmaceutical company that claims to develop innovative treatments for life-threatening diseases through targeted protein degradation. Its pipeline products include novel therapeutics in the fields of oncology, Immuno-oncology, and neuroscience.
Even though the Connecticut-based company saw a big decline of 40.26% in annual revenue growth at the end of 2023, thanks to the advancement in the clinical trials of the company’s novel therapeutic drugs such as oral PROTAC to treat neurodegenerative diseases, Wall Street analysts have maintained a “Strong Buy” on this stock. The 16 analysts with 12-month price forecasts for Arvina, Inc (NASDAQ:ARVN) have an average target of $62.94, with a low estimate of $20 and a high estimate of $95. The average price target predicts an increase of 141.06% from the current stock price of $26.11.
At the end of Q1 of 2024, Arvinas, Inc (NASDAQ:ARVN) was held by 36 hedge funds in the Insider Monkey database, with EcoR1 Capital holding the lion’s share of 6,726,491 shares valued at $277.67 million.
7. Shoals Technologies Group, Inc. (NASDAQ:SHLS)
Upside potential as of June 15th, 2024: 164.35%
Market cap: $1.11 billion
Shoals Technologies Group, Inc. (NASDAQ:SHLS) was founded in 1996 as an automotive supplier and later transitioned into solar EBOS in the early 21st century. The company is a leading provider of EBOS solutions and products for solar, batteries, and EV charging applications in the USA and globally.
The Portland-based company reported a revenue of $488.94 million in 2023, an increase of 49.55% from the $326.94 million reported in the previous year. The 16 analysts with a 12-month forecast for the Shoals Technologies Group, Inc (NASDAQ:SHLS) have an average target price of $17.13 with a low estimate of $6 and a high estimate of $33. The average target price predicts an increase of 164.35% from the current stock price of $6.48. The analysts also expect an increase in the company’s EPS growth by the end of 2024.
In the Insider Monkey database, among the 32 hedge funds that held SHLS at the end of Q1 of 2024, Joho Capital boasted the largest stake of 6,423,545 shares valued at $71.82 million.
6. ChargePoint Holdings, Inc. (NYSE:CHPT)
Upside potential as of June 15th, 2024: 169.82%
Market Cap: $718.76 million
ChargePoint Holdings, Inc. (NYSE:CHPT) has a great upside potential. The company provides its customers with electric vehicle (EV) charging networks and solutions in North America and Europe.
The Campbell-based EV charging company reported revenue for its first quarter, which was down 18% year over year. Meanwhile, networked charging systems revenue was also down 34% while the subscription revenue was $33.4 million, up 27% from the $26.4 million in the prior year’s same quarter.
The 14 analysts providing 12-month price forecasts for ChargePoint Holdings, Inc. (NYSE:CHPT) have an average price target of $4.56. The low estimate is $1.50, with a high estimate of $17. This average price target suggests a 169.82% increase from the current stock price of $1.69, making it a good small-cap stock to invest in.
5. Viridian Therapeutics, Inc. (NASDAQ:VRDN)
Upside potential as of June 15th, 2024: 178.46%
Market Cap: $793.95 million
Founded in 2010, Viridian Therapeutics, Inc. (NASDAQ:VRDN) is a biotechnology company claiming to be framing the future of autoimmune diseases. The company’s product pipeline includes VRDN-001 and VRDN-003 which are monoclonal antibodies for treating Thyroid Eye Disease and other serious autoimmune diseases.
The Waltham-based company faced challenges in the first quarter of 2024, resulting in a decline of approximately -26.53%, in revenue growth. However, analysts have maintained a bullish stance for this stock in 2024. The 11 analysts with 12-month price forecasts for Virdian Therapeutics, Inc. (NASDAQ:VRDN) have an average price target of $34.64, with a low estimate of $20 and a high estimate of $51. The average price target predicts an increase of 178.46% from the current stock price of $12.44. Year to date, Viridian shares have catapulted 38.2% compared with the industry’s 5.6% fall.
The analysts highlighted the potential of Viridian’s leading products VRDN-001 and VRDN-003. According to analysts, despite the established presence of Tepezza in the market, there is a significant opportunity for VRDN-003 due to its desirable subcutaneous administration form, compared to its competitor’s (Tepezza) IV infusion form. Moreover, VRDN-003 will require fewer dose administrations compared to Tepezza.
The company’s top product in development, the VRDN-003 is in clinical trials, and Viridan expects to report top-line data from these late-stage clinical trials in the first half of 2026. If data from the studies is positive, the biotech company plans to file a regulatory filing with the FDA before the end of 2026. If approved, the management plans to launch the VRDN-003 with a commercially available autoinjector pen. Following the announcements of these updates, Viridian Therapeutics shares increased by 10.2% on June 12th, 2024.
4. Sunnova Energy International, Inc. (NYSE:NOVA)
Upside potential as of June 15th, 2024: 182.18%
Market Cap: $660.82 million
Ranked as the best solar company of 2024 by CNN, Sunnova Energy International, Inc. (NYSE:NOVA), engages in the provision of energy as a service in the United States. The company works towards making clean energy more accessible and affordable to homeowners and businesses. Sunnova provides its services in over 42 states making it one of the country’s most widely available solar installers, along with a broad range of payment options, it is an attractive service for customers.
The Houston-based company, reported a revenue of $720.65 million, a YoY increase of 29.22% from the $557.69 million. The analysts are predicting Sunnova Energy’s revenue to grow up to $904.23 million, with EPS going from -3.43 to -2.13 by the end of 2024. The 23 analysts with 12-month price forecasts for NOVA stock have an average target of $15.04, with a low estimate of $4.50 and a high estimate of $58. Wall Street analysts have maintained a Buy rating on this stock with an upside potential of 182.18% making it one of the best small-cap stocks to invest in.
It is expected that Sunnova Energy’s growth revenue will slow down, the forecast predicts a 32% annual growth rate by the end of 2024 which is lower than the historical 42% p.a growth over the last 5 years. But, when compared to other companies in the industry with analyst coverage, which are forecasted to grow their revenue by 4.5% per year, it is evident that even with an expected growth slowdown, Sunnova Energy International, Inc (NYSE:NOVA) is still expected to grow faster than the wider industry.
In Q1 of 2024, stocks of Sunnova Energy International, Inc (NYSE:NOVA) were held by 20 hedge funds in the Insider Monkey database, with D E Shaw holding the largest stake of 90,450,000 shares valued at $48.09 million.
3. REGENXBIO Inc. (NASDAQ:RGNX)
Upside potential as of June 15th, 2024: 226.35%
Market Cap: $611.27 million
REGENXBIO Inc (NASDAQ:RGNX), is a clinical-stage biotechnology company involved in developing gene therapy to cure genetic defects and other serious metabolic, retinal, and neurodegenerative diseases. The company’s pipeline products include ABBV-RGX-314 for treating diabetic retinopathy, macular degeneration, and other debilitating retinal diseases; and RGX-202 which is in clinical trials for the treatment of Duchenne muscular dystrophy. Other products include RGX-121,111,181 and RGX 381 for treating various genetic defects.
Even though, the Rockville-based company reported a decline in revenue growth, both at the end of 2023 and in the first quarter of 2024. Yet, the analysts have maintained a very bullish stance on the REGENXBIO stock. The reasons for this stance might stem from the fact that the company reported a net loss lower than expected and their RGX-121 is on track for BLA filing to get approved for potential one-time gene therapy. Meanwhile, the initial data from the AFFINITY DUCHENE trial for RGX-202 shows high tolerance and high potential. Moreover, the anticipated filing and expected approval of RGX-121 for Hunter syndrome provides a commercial product with market potential.
The 11 analysts with 12-month forecasts for REGENXBIO, Inc. (NASDAQ:RGNX) have an average target of $40.5, with a low estimate of $21 and a high estimate of $55. The average price target predicts an upside potential of 226.35% from the current stock price of $12.41. Thus, Wall Street analysts have maintained a “strong-buy” rating on this stock.
According to the Insider Monkey database, REGENXBIO, Inc. (NASDAQ:RGNX), in Q1 of 2024, was held by 29 hedge funds with Redmile Group holding the largest stake at 4,551,556 shares valued at $95.9 million.
2. Pacific Biosciences of California, Inc (NASDAQ:PACB)
Upside potential as of June 15th, 2024: 262.50%
Market Cap: $479.35 million
Next on the list of small-cap stocks to buy, is the MenloPark-based Pacific Biosciences of California, Inc (NASDAQ:PACB), which designs, develops, and manufactures sequencing solutions to genetically complex problems. The company serves academic and governmental research institutes, providing them with sequencing solutions, consumable products (SMRT technology), various reagent kits, and binding kits (modified DNA Polymerase).
The Bioscience company reported a revenue of $200.52 million at the end of 2023, showing an increase of 56.29% from the $128.3 million reported in the previous year. Meanwhile reporting a gross profit of $52.78 million at the end of 2023. Pacific Biosciences is implementing to ease client’s upfront equipment requirements. This strategy has already generated funnel opportunities expected to close in the present year. Moreover, the company is taking serious measures to accelerate growth while driving towards cash flow breakeven.
The 12 Wall Street analysts with 12-month forecasts PACB stock have an average price target of $6.38 with a low estimate of $2 and a high estimate of $15, maintaining a “Buy” rating. This average price target predicts an upside potential of 262.50% from the current stock price of $1.76.
At the end of Q1 of 2024, Pacific Biosciences of California, Inc (NASDAQ:PACB) was held by 27 hedge funds with ARK Investment Management holding the largest stake of 33,290,137 shares valued at a total of $124.83 million.
1. Allogene Therapeutics, Inc. (NASDAQ:ALLO)
Upside potential as of June 15th, 2024: 451.59%
Market Cap: $490.64 million
Founded in 2017, Allogenic Therapeutics, Inc (NASDAQ:ALLO) is a clinical-stage immuno-oncology company focused on the development and commercialization of genetically engineered T-cell therapies for treating certain blood cancers and other tumors.
The analysts are very bullish about the potential of the San Francisco-based company, maintaining a “Buy” rating for the ALLO stock. This bullish view is partly because the Medical, Biomedical, and Genetics industries are seeing solid earning estimates, and often a rising tide will lift all the boats in an industry. Allogene Therapeutics is looking good on its own, with current estimates narrowing loss per share from $2.09 of the previous year to $1.52 by the end of 2024, indicating financial resilience and potential for growth.
Moreover, Allogene is set to initiate the first T-cell therapy targeting Large B-cell Lymphoma, representing innovation and leadership in the field of CAR-T therapy. Meanwhile, the acquisition of EU and UK rights for the Cema-cel expands the company’s market potential exponentially, increasing future revenue prospects.
The 12 analysts with 12-month precise forecasts for the ALLO stock have an average price target of $12.96, with a low estimate of $4.60 and a high estimate of $35. The average price target represents an upside potential of 451.49% from the current stock price of $2.35 making it the top small-cap stock to buy according to analysts.
By the end of Q1 of 2024, shares of Allogenic Therapeutics, Inc (NASDAQ:ALLO) were held by 18 hedge funds with Citadel Investment Group holding the largest stake of 3,113,225 shares valued at $13.916 million.
While we acknowledge the potential of Allogenic Therapeutics as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Allogenic Therapeutics but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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