In this article, we will take a look at the 12 most promising micro-cap stocks according to analysts.
If there’s one thing investors and financial markets in general don’t want more of in 2023, it’s risk. The 2022 market crash and the stubborn inflation that is expected to force the Federal Reserve to continue its rate-hike spree isn’t letting investors take a breather. However, long-term investors believe now is the right time to pile into stocks with strong upside potential.
“The Asset Class of Opportunity”
Oberweis Asset Management, in its report titled “Micro-Cap: The Asset Class of Opportunity,” said that investing in micro-cap stocks can become more appealing when valuations of asset classes are compelling. The firm said that investing in micro-cap stocks can enhance the risk-adjusted performance of a total equity portfolio. That’s because usually micro-cap stocks don’t move by broader movements of US equities, bonds and foreign stocks. When seen in the context of the broader market downturn that started with rising global inflation and Russia-Ukraine war, micro-cap stocks look attractive since they give a chance to investors to take calculated risk that can bring huge profits in the long term.
The report highlighted some interesting data points which show that investing in micro-cap stocks can be profitable in the long term, if executed correctly. Oberweis said that micro-cap managers, over a long period of time, tend to generate higher returns than traditional small-cap managers. The report also said that volatility for micro-cap stocks isn’t “materially higher” when compared to small-cap stocks.
Another important point highlighted in the Oberweis report says that large-cap companies get a lot of attention as everyone, including major stock research and analyst firms, are focused on them. The report said these stocks tend to be more fairly priced as compared to small, unknown companies that don’t get a lot of attention. Another advantage this dynamic gives to investors in the micro-cap space was summed up by the report in these words:
“This lack of Wall Street research in the micro-cap arena means active managers who conduct their own fundamental research should have an information advantage which can help them generate above-market returns.”
Photo by AlphaTradeZone
Our Methodology
For this article we first used the Finviz stock screener to identify micro-cap stocks whose average analyst price target is at least 30% more than their current stock prices, as of February 14. We then sorted the resultant dataset in descending order of market cap and picked top 12 stocks. When then looked for one-year price estimate of these stocks on their respective Yahoo Finance pages. These stocks have huge upside potential based on their analyst price estimates and their current stock prices.
Most Promising Micro-Cap Stocks According to Analysts
12. Quipt Home Medical Corp. (NASDAQ:QIPT)
Number of Hedge Fund Holders: 4
One-Year Average Price Target: $9.17
Quipt Home Medical Corp. (NASDAQ:QIPT) is an in-home medical equipment and supplies company. It ranks 12th in our list of the most promising micro-cap stocks according to analysts. Quipt Home Medical Corp. (NASDAQ:QIPT) recently posted its fiscal first quarter results. GAAP EPS in the quarter came in at $0.01, meeting estimates. Revenue in the quarter jumped about 38.3% to a total of $40.8 million. Analysts believe Quipt Home Medical Corp. (NASDAQ:QIPT) has a thriving market. It focuses on patients with heart and lung diseases. Quipt Home Medical Corp. (NASDAQ:QIPT) also gives medical equipment on rent.
Insider Monkey’s database of elite hedge funds and their holdings shows that 4 hedge funds reported having stakes in Quipt Home Medical Corp. (NASDAQ:QIPT) as of the end of the third quarter of 2022.
11. Ranger Energy Services, Inc. (NYSE:RNGR)
Number of Hedge Fund Holders: 5
One-Year Average Price Target: $15.50
Oil and gas services company Ranger Energy Services, Inc. (NYSE:RNGR) is one of the promising micro-cap stocks according to analysts. The one-year average price target for Ranger Energy Services, Inc. (NYSE:RNGR) according to Yahoo Finance is $15.50. As of February 14 morning, Ranger Energy Services, Inc. (NYSE:RNGR) was trading at $11.90.
In October 2022, Ranger Energy Services, Inc. (NYSE:RNGR) posted its third-quarter results. GAAP EPS in the period came in at $0.53, beating estimates by $0.20. Revenue in the period jumped 116.6% to total $177 million, beating estimates by $11.4 million.
The energy company’s Adjusted EBITDA also jumped 69% in the quarter to total $30.3 million.
A total of 5 hedge funds tracked by Insider Monkey reported having stakes in Ranger Energy Services, Inc. (NYSE:RNGR) at the end of the third quarter of 2022.
10. Akoustis Technologies, Inc. (NASDAQ:AKTS)
Number of Hedge Fund Holders: 6
One-Year Average Price Target: $7.65
Akoustis Technologies, Inc. (NASDAQ:AKTS) sells radio frequency (RF) filter products for the mobile wireless device industry. Earlier in February, Akoustis Technologies, Inc. (NASDAQ:AKTS) posted fiscal Q2 results. Adjusted EPS in the quarter came in at -$0.19, beating estimates by $0.07. Revenue in the quarter jumped a whopping 59.7% in the period to total $5.86 million. However, the revenue figure missed estimates by $0.07 million. Akoustis Technologies, Inc. (NASDAQ:AKTS) said that its consumer activity remained strong in the quarter, thanks to its expanding pipelines related to 5G and timing control.
In January, Akoustis Technologies, Inc. (NASDAQ:AKTS) jumped after B. Riley Securities analyst Craig A. Ellis started covering the stock with a “Buy” rating and a $9.25 price target.
The analyst said that he believes Akoustis Technologies, Inc. (NASDAQ:AKTS) offers “one of the semiconductor sector’s most robust 5G sales growth and GM expansion outlooks.”
9. Verrica Pharmaceuticals Inc. (NASDAQ:VRCA)
Number of Hedge Fund Holders: 7
One-Year Average Price Target: $13.00
Pennsylvania-based Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) makes treatments for skin diseases. Recently, Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) jumped after RBC Capital Markets upgraded the stock. Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) cited a potential approval from the FDA for the company’s VP-102 treatment for a viral skin infection called molluscum contagiosum (MC).
RBC’s Gregory Renza expects a “favorable and sooner than expected approval outcome for VP-102 (YCANTH), as early as July.”
For context, Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) in January resubmitted new drug application (NDA) with the FDA for the above treatment after the authorities had declined to approve the company’s NDA in March 2022.
In November, Verrica Pharmaceuticals Inc. (NASDAQ:VRCA) posted its third quarter results. GAAP EPS in the period came in at $0, beating estimates by $0.14. Revenue in the quarter totaled $8.3 million, surpassing estimates by a whopping $4.05 million.
8. Quantum-Si incorporated (NASDAQ:QSI)
Number of Hedge Fund Holders: 9
One-Year Average Price Target: $5.00
Quantum-Si incorporated (NASDAQ:QSI) is a life sciences company known for its single molecule detection platform for sample preparation and sequencing. Quantum-Si incorporated (NASDAQ:QSI) has gained about 16% year to date in 2023 through February 14. In November, Quantum-Si incorporated (NASDAQ:QSI) posted its third-quarter results. Its GAAP EPS in the quarter came in at -$0.23 beating estimates by $0.02. As of the end of the third quarter, Quantum-Si incorporated (NASDAQ:QSI)’s cash and cash equivalents and investments in marketable securities were $372.1 million.
As of the end of the third quarter of 2022, 9 hedge funds out of the 920 funds had stakes in Quantum-Si incorporated (NASDAQ:QSI). The net worth of these stakes was about $58 million. The biggest stakeholder of Quantum-Si incorporated (NASDAQ:QSI) during this period was Catherine D. Wood’s ARK Investment Management which had a stake worth over $36 million in the company. Another notable hedge fund stakeholder of Quantum-Si incorporated (NASDAQ:QSI) was Larry Robbins’ Glenview Capital with a stake of over $14 million.
7. Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL)
Number of Hedge Fund Holders: 9
One-Year Average Price Target: $8.25
Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) is a seaborne dry bulk logistics and transportation services company. Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) ranks 7th in our list of most promising micro-cap stocks according to analysts. Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) posted its third quarter results in November. Its adjusted EPS in the period came in at $0.52, missing estimates by $0.04. Revenue in the quarter fell 13.4% on a YoY basis to total $184.5 million. However, the figure beat estimates by $3.49 million. Adjusted EBITDA in the period came in at $38.5 million, which shows a 14% jump year over year. Operating cash flow also increased 41% YoY to total $32.6 million.
A total of 9 hedge funds tracked by Insider Monkey reported having stakes in Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL). The total value of these hedge fund stakes was about $5 million.
6. Cabaletta Bio, Inc. (NASDAQ:CABA)
Number of Hedge Fund Holders: 11
One-Year Average Price Target: $12.83
Clinical-stage biotech company Cabaletta Bio, Inc. (NASDAQ:CABA) has rewarded its investors over the past 12 months, gaining more than 200% in the period. Yet Cabaletta Bio, Inc. (NASDAQ:CABA)’s average price estimate for 12 months stands at $12.83, which presents an attractive upside from its $9.39 price as of 09:56 AM ET on February 14.
In January, Morgan Stanley upgraded Cabaletta Bio, Inc. (NASDAQ:CABA) to Overweight from Equal Weight. The firm cited the company’s CD19-targeting CAR T cell therapy CABA-201 for the upgrade.
Morgan Stanley’s analyst Michael Ulz also raised the price target for Cabaletta Bio, Inc. (NASDAQ:CABA) to $16 from $3.
5. OptimizeRx Corporation (NASDAQ:OPRX)
Number of Hedge Fund Holders: 15
One-Year Average Price Target: $26.17
OptimizeRx Corporation (NASDAQ:OPRX) is a digital health technology company. OptimizeRx Corporation (NASDAQ:OPRX) ranks 5th in our list of the most promising micro-cap stocks according to analysts. In November, OptimizeRx Corporation (NASDAQ:OPRX) posted its third-quarter results. Adjusted EPS in the period came in at $0.07, beating estimates by $0.03. Revenue in the quarter fell 6.3% on a YoY basis to total of $15.1 million but still beat estimates by $0.08 million. OptimizeRx Corporation (NASDAQ:OPRX) said its gross profit in the quarter increased by 4% on a YoY basis. Cash, cash equivalents and short-term investments totaled $78.8 million as of the end of the third quarter of 2022.
Artisan Partners made the following comment about OptimizeRx Corporation (NASDAQ:OPRX) in its Q3 2022 investor letter:
“OptimizeRx Corporation (NASDAQ:OPRX) offers a platform of digital communications solutions between pharma companies and both prescribing physicians and patients. The company’s vast network of electronic health record partners/integrations enables pharma companies to more intelligently target and directly communicate to physicians about important clinical and financial information, leading to better prescribing decisions. Unfortunately, pharmaceutical companies have been dialing back their digital marketing spend given the waning macro backdrop, which has negatively impacted OptimizeRx’s profit cycle. Given our lack of visibility into when these headwinds will abate, we exited our position.”
4. Aadi Bioscience, Inc. (NASDAQ:AADI)
Number of Hedge Fund Holders: 15
One-Year Average Price Target: $42.50
As of mid-day trading on February 14, Aadi Bioscience, Inc. (NASDAQ:AADI) was trading at around $11.8, while its one-year price target is $42.50, which shows a huge upside from the current levels. Aadi Bioscience, Inc. (NASDAQ:AADI) develops therapies for genetically defined cancers with alterations in mTOR pathway genes.
A total of 15 hedge funds reported having stakes in Aadi Bioscience, Inc. (NASDAQ:AADI) as of the end of the third quarter of 2022.
3. Wheels Up Experience Inc. (NYSE:UP)
Number of Hedge Fund Holders: 17
One-Year Average Price Target: $3.54
Private aviation services company Wheels Up Experience Inc. (NYSE:UP) is a penny stock that has strong potential according to analysts. In December, Wheels Up Experience Inc. (NYSE:UP)’s shares rose after an SEC filing revealed that the company’s CEO bought 400,000 shares.
For the third quarter, Wheels Up Experience Inc. (NYSE:UP)’s EPS came in at -$0.36, beating estimates by $0.07. Revenue in the quarter jumped about 39.2% to a total of $420.36 million, surpassing estimates by $38.32 million. Active members in the period jumped 12% on a YoY basis to reach 12,688.
As of the end of the third quarter of 2022, 17 hedge funds reported owning shares in Wheels Up Experience Inc. (NYSE:UP). The total value of these stakes was over $8.3 million.
2. Atai Life Sciences N.V. (NASDAQ:ATAI)
Number of Hedge Fund Holders: 19
One-Year Average Price Target: $13.72
Clinical-stage biopharmaceutical company Atai Life Sciences N.V. (NASDAQ:ATAI) shares took a beating in January after the company said its majority-owned unit Perception Neuroscience’s therapy PCN-101 (R-ketamine) did not meet the main goal of a Phase 2a trial for treatment-resistant depression.
However, Atai Life Sciences N.V. (NASDAQ:ATAI)’s one-year average price target of $13.72 presents a solid upside from the current levels ($1.79 as of February 14 morning).
As of the end of the third quarter of 2022, 19 hedge funds tracked by Insider Monkey reported having stakes in Atai Life Sciences N.V. (NASDAQ:ATAI). The total value of these stakes was over $53 million. The biggest stakeholder of Atai Life Sciences N.V. (NASDAQ:ATAI) during this period was Catherine D. Wood’s ARK Investment Management which had a $20.3 million stake in the company.
1. Skillsoft Corp. (NYSE:SKIL)
Number of Hedge Fund Holders: 21
One-Year Average Price Target: $3.94
Skillsoft Corp. (NYSE:SKIL) is a digital learning services company with strong upside potential according to analysts as the workforce around the world flock to online learning platforms to upskill themselves to keep up with the changing industry trends. In December, Skillsoft Corp. (NYSE:SKIL) posted its third-quarter results. Revenue in the quarter came in at $139.39 million, beating estimates by $0.65 million. For fiscal 2023, Skillsoft Corp. (NYSE:SKIL) said it expects GAAP revenue to come between $520 million to $550 million, versus the consensus estimate of $571.70 million.
In January, Skillsoft Corp. (NYSE:SKIL) announced that it entered into a content partnership with Netherlands-based online skills training company GoodHabitz.
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Disclosure: None. 12 Most Promising Micro-Cap Stocks According to Analysts is originally published on Insider Monkey.
