In this article, we will look at the Top 11 Small Cap Stocks to Buy with Biggest Upside Potential.
On April 24, Jill Carey Hall, BofA Securities head of U.S. small/mid-cap strategy, appeared on ‘Closing Bell’ to talk about the impact of tariffs on small caps. She also discussed the outlook for the category, saying that the earnings backdrop is essential. When we look back a year ago, investors were excited about small caps, as the earnings were recovering and the market was coming out of the 2023 earnings recession. Everyone expected that these stocks would see double-digit earnings growth by mid-last year, outpacing large caps. That got pushed out for over a year, and now the sector has sold off a lot.
While we have gotten some potential good news on tariffs, there is still a lot of uncertainty, and we are in a backdrop where earnings revisions have still been negative. She opined that she would feel more comfortable if we were in a backdrop where there was confidence in earnings recovery because last earnings season, the commentary was a lot more negative from small-cap companies than large-cap companies. So far, this earnings season is still early for small caps, but guidance in both large and small has been weak.
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What Should You Invest in This Year?
Hall said that the sector would see a much better picture if earnings revisions turned around with higher confidence, and not only the tariffs were better than expected but also the economic backdrop was better. However, we are also in a place where economists think the Fed will stay on hold this year, and the Russell has been very sensitive to Fed expectations. Her outlook for small caps thus points towards a more credit-sensitive environment highly tethered to Fed expectations, with no anticipation of a rate cut this year. She also highlighted that looking at corporate commentary as small-cap reporting kicks off is important.
Not all small caps are created equal, even when some people consider them to be so. Hall opined that this is definitely a year where you want to be selective in small caps, focusing on stocks with strong margins amid tariff uncertainty. She favored high-quality domestic stocks, steering clear of tariff and refinancing risks and focusing on stocks with positive revisions in this broad backdrop of negative revisions. There are groups of stocks that are more sensitive to tariffs, just as there are groups that are more global and domestic. Similarly, some groups are more levered with higher refinancing risks within small caps if the rate stays higher and credit spreads stay elevated.
Therefore, she reasoned that she would stick with higher-quality stocks that are more profitable and have strong operating margins. Stocks with these characteristics have been some of the top performers within the industry amid tariff risks. From a sector perspective, if investors want to be more defensive, utilities screen well across the work, both in small and large caps.
There will thus be opportunities in the segment, according to Hall, but one needs to be selective. She also expressed positive sentiments for mid-caps, which have been one of the best performers in the sector this year. They have seen much better revision trends, cleaner balance sheets, and fewer risks from potential earnings hits from tariffs than small caps because the latter have thinner margins and could see a greater hit.
With these trends in mind, let’s examine the top 11 small-cap stocks to buy with the biggest upside potential.
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Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 30 small cap stocks and chose the top 11 with the biggest analyst upside potential as of May 2, 2025. We also included the number of hedge fund holders as of Q4 2024, which we sourced from Insider Monkey’s database. The list is presented in ascending order of stocks’ upside potential.
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 363.5% since May 2014, beating its benchmark by 208 percentage points (see more details here).
Top 11 Small Cap Stocks to Buy with Biggest Upside Potential
11. Centessa Pharmaceuticals plc (NASDAQ:CNTA)
Market Cap: $1.79 billion
Analyst Upside: 129.76%
Number of Hedge Fund Holders: 36
Centessa Pharmaceuticals plc (NASDAQ:CNTA) is a clinical-stage pharmaceutical company headquartered in the UK. Its portfolio includes preclinical to phase three uncorrelated programs covering diseases with highly unmet needs in immunology, hematology, oncology, neuroscience, and rare diseases.
On April 8, Leerink Partners analyst David Risinger reiterated their bullish stance on Centessa Pharmaceuticals plc (NASDAQ:CNTA) and gave it a buy rating based on the promising developments of its ORX750 compound. The analyst reasoned that the company’s recent presentation on ORX750’s compelling efficacy profile at the American Academy of Neurology Annual Meeting reflected significant improvements in alertness and sleep latency in a proof-of-concept study, which suggests that the compound could take the lead as the potentially best-in-class orexin receptor 2 agonist. This could allow it to outperform its competitors, bringing a positive light to the company’s operations.
The analyst also opined that the compound’s safety profile remains favorable, bolstering its potential as a leading therapeutic option, as there are no reported adverse events. Centessa Pharmaceuticals plc’s (NASDAQ:CNTA) upcoming Phase 2a trial results for various sleep disorders further support the positive outlook, as they could shed more light on ORX750’s safety and efficacy.
10. Shenandoah Telecommunications Company (NASDAQ:SHEN)
Market Cap: $630.31 million
Analyst Upside: 133.39%
Number of Hedge Fund Holders: 14
Shenandoah Telecommunications Company (NASDAQ:SHEN) provides regulated and unregulated telecommunication services to end-user customers and other telecommunication providers. Its services include broadband Internet, voice, video, high-speed Ethernet, managed network services, and dark fiber leasing. It has an elaborate regional network comprising more than 16,800 route miles of fiber.
Analyst Hamed Khorsand from BWS Financial revisited Shenandoah Telecommunications Company (NASDAQ:SHEN) on May 1, giving it a Buy rating and setting a $26.00 price target. The analyst said that the company holds potential for financial improvement and growth, as it has undergone consistent expansion in its Glo Fiber customer base. Subscriber numbers for the service reached around 71,000 and are anticipated to exceed 75,500 by the end of fiscal Q2. This positive growth trajectory highlights the potential for future growth and a solid market presence, ranking it tenth on our list of the best small-cap stocks to buy with the highest upside potential.
Khorsand also said that Shenandoah Telecommunications Company (NASDAQ:SHEN) is on the path to generating free cash flow with continuous network expansion, with homes passed reaching 600,000 and penetration rate surpassing 20% in Glo Fiber areas. Although the company has exposure to debt because of network expansion, its adjusted EBITDA is growing faster than expected, which reflects operational efficiency and financial resilience. These factors thus support the analyst’s buy rating.
9. Janux Therapeutics, Inc. (NASDAQ:JANX)
Market Cap: $1.89 billion
Analyst Upside: 140.96%
Number of Hedge Fund Holders: 54
Janux Therapeutics, Inc. (NASDAQ:JANX) is a preclinical stage biopharmaceutical company that develops therapeutics based on the Tumor Activated T Cell Engager platform technology. The company ranks ninth on our list of the top small-cap stocks to invest in with the biggest upside potential and develops tumor-activated immunotherapies for cancer through two bispecific platforms: Tumor Activated T Cell Engagers (TRACTr) and Tumor Activated Immunomodulators (TRACIr).
On March 6, JonesTrading analyst Soumit Roy reiterated their bullish stance on Janux Therapeutics, Inc. (NASDAQ:JANX), giving it a Buy rating because of its upcoming catalysts and promising technological advancements. The company’s masking technology holds considerable potential, reporting best-in-class data amid a competitive environment. It is also anticipated to report updated data from its PSMA and EGFR targeting masked T cell engagers in 2025. The analyst expects this to further validate its technology, bolstering its clinical-stage programs.
Janux Therapeutics, Inc. (NASDAQ:JANX) also holds a considerable cash position of around $1.03 billion, which the analyst believes can support their present and future development and research initiatives. Another key factor behind Roy’s positive outlook is the company’s focus on transitioning to earlier treatment lines and exploring different dosing regimens. So, while the company is facing some competitive pressure, its long-term potential paints an optimistic picture.
8. IDEAYA Biosciences, Inc. (NASDAQ:IDYA)
Market Cap: $1.79 billion
Analyst Upside: 165.77%
Number of Hedge Fund Holders: 34
IDEAYA Biosciences, Inc. (NASDAQ:IDYA) develops oncology-focused precision medicine, focusing on targeted therapeutics for patients selected using molecular diagnostics. The company’s product candidate is IDE196, a protein kinase C inhibitor that targets genetically defined cancers with GNAQ or GNA11 gene mutations.
On April 15, analyst Jeet Mukherjee from BTIG maintained a Buy rating on IDEAYA Biosciences, Inc. (NASDAQ:IDYA), setting a $62.00 price target and highlighting its promising future prospects. The analyst reasoned that the company recently attained a significant milestone by aligning with the FDA on the pivotal endpoints for its Phase 3 trial of darovasertib in treating neoadjuvant uveal melanoma. The alignment covers key endpoints critical for complete approval, such as vision and eye preservation.
The analyst also highlighted that IDEAYA Biosciences, Inc. (NASDAQ:IDYA) is poised for several significant data releases that could act as potential catalysts for the stock, including the topline data from a Phase 2/3 trial in metastatic uveal melanoma. This also includes updates from other ongoing studies, as Mukherjee expects them to be potential factors that could upgrade the company’s valuation. IDEAYA Biosciences, Inc. (NASDAQ:IDYA) is thus an attractive buy for the analyst, with the strategic design of the Phase 3 study, complete with its interim analysis plans and detailed cohort structure, further supporting the potential for positive outcomes.
7. Edgewise Therapeutics, Inc. (NASDAQ:EWTX)
Market Cap: $1.75 billion
Analyst Upside: 189.63%
Number of Hedge Fund Holders: 49
Edgewise Therapeutics, Inc. (NASDAQ:EWTX) is a clinical-stage biopharmaceutical company that develops, discovers, and commercializes innovative treatments for serious, rare muscle disorders with considerable unmet medical needs and severe cardiac conditions. Its lead product candidate is sevasemten (EDG-5506), an orally administered skeletal myosin inhibitor in late-stage clinical trials in Becker and Duchenne muscular dystrophies. The company ranks seventh on our list of the top small-cap stocks to invest in with the biggest upside potential.
Guggenheim analyst Debjit Chattopadhyay initiated coverage of Edgewise Therapeutics, Inc. (NASDAQ:EWTX) with a Buy rating on April 30, setting a $41 price target. The analyst told investors in a research note that the company has two small molecules in mid to late-stage clinical development: sevasemten for Duchenne muscular dystrophy and EGD-7500 for obstructive and non-obstructive hypertrophic cardiomyopathy. According to the analyst, the company’s current $1 billion enterprise value “offers a compelling entry point,” with multiple readouts over the coming 12 months and cash into 2028. Guggenheim also initiated coverage of Edgewise Therapeutics, Inc. (NASDAQ:EWTX) with a Buy rating on the same day, setting a $41 price target.
6. Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR)
Market Cap: $1.93 billion
Analyst Upside: 198.78%
Number of Hedge Fund Holders: 34
Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) is a biopharmaceutical company that develops medicines to treat intractable diseases by silencing the genes causing them. Its preclinical stage drug candidates are ARO-ANG3, ARO-AAT, ARO-APOC3, ARO-HIF2, ARO-HSD, ARO-Lung2, ARO-COV, and ARO-ENaC.
On March 10, analyst Patrick Trucchio from H.C. Wainwright reiterated a Buy rating on Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) and set a $80.00 price target. The analyst said the company holds a promising future outlook because of its complement disease program. Its Phase 1/2 trial of ARO-C3 delivered positive results for treating complement-mediated renal diseases. It exhibited a notable decrease in complement activity and proteinuria, reflecting its potential as a potentially blockbuster therapy. The data showed that ARO-C3 did not include severe adverse events and was well-tolerated, with its durability highlighting a competitive advantage with less frequent dosing than other therapies.
The analyst also said that Arrowhead Pharmaceuticals, Inc. (NASDAQ:ARWR) boasts a robust pipeline with other promising candidates as well, including ARO-CFB, which addresses non-renal complement-mediated diseases. The company has a strategic approach to the advancement of its candidates, and despite market competition and risks of clinical development, ARO-C3 and other products in its pipeline hold the potential to address unmet medical needs, supporting the buy rating.
5. Cogent Biosciences, Inc. (NASDAQ:COGT)
Market Cap: $641.01 million
Analyst Upside: 207.10%
Number of Hedge Fund Holders: 38
Cogent Biosciences, Inc. (NASDAQ:COGT) is a biotechnology company that develops precision therapies for genetically defined diseases. The company’s focus is on its clinical program, bezuclastinib, a selective tyrosine kinase inhibitor that potently inhibits the KIT D816V mutation and other mutations in KIT exon 17.
On March 10, the company received a Buy and a $17.00 price target from Scotiabank analyst Louise Chen. Piper Sandler analyst Allison Bratzel also maintained a Buy rating on Cogent Biosciences, Inc. (NASDAQ:COGT) on March 7, setting a price target of $24.00. The company has a strong cash balance and an emerging pipeline of potentially best-in-class targeted therapies, positioning it to have a transformative 2025. It plans to submit its first NDA for its clinical program, bezuclastinib, by the end of 2025.
Cogent Biosciences, Inc. (NASDAQ:COGT) is the fifth-best small-cap stock to buy with the biggest upside potential. Analyst Robert Burns from H.C. Wainwright also reiterated a Buy rating on the company on February 28, keeping the price target at $14.00. He said the updated results from the SUMMIT trial showed considerable improvements in symptom severity. The trial evaluated bezuclastinib in non-advanced systemic mastocytosis. MS2D2, the novel patient-reported outcome measurement scale, reflected notable mean improvements in overall symptom severity from baseline at various intervals, highlighting the drug’s efficacy and supporting the optimistic future outlook.
4. WeRide Inc. (NASDAQ:WRD)
Market Cap: $1.81 billion
Analyst Upside: 224.83%
Number of Hedge Fund Holders: 2
WeRide Inc. (NASDAQ:WRD) is headquartered in Guangzhou, China, and develops an autonomous driving technology platform. The company ranks fourth on our list of the best small-cap stocks to invest in with the biggest upside potential, and offers Robotaxi, Robobus, Robovan, Robosweeper, and advanced driving solutions. Its offerings include smart services in online ride-hailing, environmental sanitation, on-demand transport, and urban logistics.
The company is focusing on expanding its operations, and analysts are bullish on the stock. On April 2, it announced a partnership with Uber and Dubai’s Road and Transport Authority to integrate its self-driving robotaxis into Dubai’s public transportation system. This marks a considerable milestone in the company’s operations and autonomous mobility after WeRide Inc.’s (NASDAQ:WRD) historical attainment of the UAE’s first national license for self-driving vehicles on public roads in 2023. The company thus holds a significant market position as the leading autonomous mobility technology provider in the Middle East. This initiative corresponds with Dubai’s Self-Driving Transport Strategy, which aims to transition 25% of all journeys in the city into autonomous trips by 2030 and brings optimism to the company’s future operations in the city.
WeRide Inc.’s (NASDAQ:WRD) collaboration marks the first time that AVs will be available on Uber outside the United States. The company aims to increase the number of Robotaxi on the Uber platform to 50 by mid-2025. It also launched its first strategic Robotaxi pilot project in Switzerland in January and is well-positioned to capitalize on this transition.
3. Vertical Aerospace Ltd. (NYSE:EVTL)
Market Cap: $321.30 million
Analyst Upside: 224.84%
Number of Hedge Fund Holders: 8
Vertical Aerospace Ltd. (NYSE:EVTL) is a global aerospace and technology company that designs, manufactures, and sells zero-operating-emission electric vertical takeoff and landing aircraft. It employs cutting-edge technology from the energy, automotive, and aerospace industries for electric aviation and its use in the advanced air mobility (AAM) market.
On March 20, analyst Austin Moeller from Canaccord Genuity maintained a Buy rating on Vertical Aerospace Ltd. (NYSE:EVTL) and set the price target at $13.50. The analyst said the company holds a promising position in the eVTOL market. Its VX4 prototype is a full-scale aircraft that allows a streamlined certification process and efficient data collection. This distinguishes the company from its competitors, who scale up from subscale models that potentially complicate development.
Moeller also reasoned that VX4 offers higher cargo capacity and passenger comfort, which makes it an attractive choice for premium travelers and supports the company’s future outlook. Vertical Aerospace Ltd. (NYSE:EVTL) also has a strong technical team that includes experienced engineers and test pilots with considerable industry backgrounds. This depth of expertise supports its ability to develop commercially viable eVTOL aircraft. The analyst opined that Vertical Aerospace Ltd.’s (NYSE:EVTL) strategic interest in securing investments from a battery OEM or a large aerospace and defense partner could potentially improve its technological and financial capabilities. It also has the potential for innovative applications and reduced operational expenses, further supplementing the buy rating.
2. Cartesian Therapeutics, Inc. (NASDAQ:RNAC)
Market Cap: $318.25 million
Analyst Upside: 233.33%
Number of Hedge Fund Holders: 7
Cartesian Therapeutics, Inc. (NASDAQ:RNAC) is a clinical-stage biotechnology company that provides mRNA cell therapies to treat autoimmune diseases. The company operates in the development and research of cell therapy product candidates. It ranks second on our list of the best small-cap stocks to buy with the biggest upside potential.
On April 10, Leerink Partners analyst Thomas Smith reiterated their bullish stance on the company, giving it a Buy rating. The analyst said that promising long-term data from Cartesian Therapeutics, Inc.’s (NASDAQ:RNAC) Phase 2b trial of Descartes-08 for treating myasthenia gravis supports this rating. The results show durable and significant decreases in key efficacy endpoints, indicating a strong therapeutic effect. Most importantly, the data shows a favorable safety profile, reporting no new safety concerns like CRS or ICANS. According to the analyst, this supports the potential for outpatient administration without the need for lymphodepletion.
Descartes-08 also holds a competitive market advantage, as trial results show a competitive depth of response and promising durability. Various other factors also point towards a positive outlook for Cartesian Therapeutics, Inc. (NASDAQ:RNAC), including the anticipation of further clinical data, including re-treatment and crossover experiences, and the upcoming Phase 3 AURORA trial.
1. Bicycle Therapeutics plc (NASDAQ:BCYC)
Market Cap: $627.08 million
Analyst Upside: 244.63%
Number of Hedge Fund Holders: 23
Bicycle Therapeutics plc (NASDAQ:BCYC) is a clinical-stage biopharmaceutical company that develops a novel medicine class, which it calls bicycles, for the treatment of diseases underserved by existing therapies. Its product portfolio includes internal product candidates directed to oncology applications.
Analyst Swayampakula Ramakanth from H.C. Wainwright maintained a Buy rating on Bicycle Therapeutics plc (NASDAQ:BCYC) on April 1, keeping the price target at $33.00. The analyst said that the company has a solid financial position and promising advancements. It has made notable progress in its pipeline, especially in its MT1-MMP-targeting Bicycle Radioconjugates (BRC), which has reflected promising results in cancer imaging and validated MT1-MMP as a potential marker for various cancers. The analyst opined that this progress supports further optimization and development of their BRCs for cancer diagnosis.
Bicycle Therapeutics plc (NASDAQ:BCYC) also has considerable cash reserves of $793 million, which can provide a clear financial pathway till H2 2027. The company is thus in a strong financial position to advance its Nectin-4 BTC program and achieve multiple clinical milestones.
Overall, BCYC ranks first among the top small-cap stocks to buy with the biggest upside potential. While we acknowledge the potential of small-cap stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than BCYC but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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