Given the way the market’s acting today, now may not seem like the best time to pursue “moonshot” plays. Rising interest rates keep putting pressure on formerly high-flying growth stocks. Meme stocks are struggling to hold onto what’s left of their “to the moon” gains. Yet for investors, there’s an area that may provide such high-risk, high-potential opportunities: micro-cap stocks.
Micro-caps, or stocks with market capitalizations under $300 million, are an under-the-radar area of the market. Too small for big time institutional investors, there’s a lot more market mispricing, and many screaming buys, hiding in plain sight.
It’s of course a more volatile, risky area, but if you’re looking for speculative plays that could pay off within a reasonable timeframe, it’s a great place to look. Here are seven micro-cap stocks, which due to either catalysts, or a low valuation, could move to substantially higher prices.
|CNTY||Century Casinos, Inc.||$8.55|
|CSSE||Chicken Soup for the Soul Entertainment, Inc.||$6.68|
|EGY||VAALCO Energy, Inc.||$7.65|
|HROW||Harrow Health, Inc.||$6.87|
|JOB||GEE Group, Inc.||$0.59|
|VTVT||vTv Therapeutics Inc.||$0.52|
Micro-Cap Stocks to Buy: Century Casinos (CNTY)
Century Casinos (NASDAQ:CNTY) is a gaming company focused on a different opportunity than its peers. While rivals have bet the ranch on i-gaming and online sports wagering, Century is pursuing a strategy of acquiring regional casinos at good prices, and making them more profitable.
Its latest purchase: the Nugget Casino, located in the Reno, Nevada gaming market. The company bought it at a reasonable price. Improving this property’s earnings could provide meaningful upside for shares. Even if it can only moderately improve its profitability, there’s something else that could move the needle for CNTY stock: a re-rating.
Trading at a lower earnings and EBITDA multiple than comparable regional gaming plays, it has room for its valuation to expand. Century could also be a takeover target for another regional casino owner, like Bally’s Corporation (NYSE:BALY). A value play within the casino gaming space, consider this micro-cap a buy.
Chicken Soup for the Soul Entertainment (CSSE)
Chicken Soup for the Soul Entertainment (NASDAQ:CSSE), which own streaming platforms like Crackle, was a bit of a meme stock in 2021. It’s cratered in price since then. Once trading for as much as $47.72 per share, it’s now at around $5.50 per share today.
At today’s prices, though, it may be worth the risk. As you may know, Chicken Soup is buying Redbox Entertainment (NASDAQ:RDBX), in what can be described as a “takeunder deal.” In other words, Redbox shareholders are selling at a discount rather than a premium to its pre-deal stock price.
But Redbox’s loss could be a gain for existing holders of CSSE stock. The deal could create $40 million in annual cost savings. Combined with the growth of its existing business, the company could see a big improvement in its profitability. That may be enough to rocket shares higher.
Micro-Cap Stocks to Buy: VAALCO Energy (EGY)
Admittedly, VAALCO Energy (NYSE:EGY) is a stock that’s already had its “moonshot” moment. Thanks to crude oil’s move to over $100 per barrel, shares in this oil exploration and production (E&P) company have climbed more than 6x over the past two years.
Even so, EGY stock may have more room to run. As my InvestorPlace colleague Jaimini Desai argued earlier this month, two factors could help this E&P firm hit higher prices. First, if oil and gas prices hold steady, and give back few of their gains, the company’s earnings may not drop next year, as is expected.
Second, operational improvements. These could help it generate more profits from its production properties in western Africa. Trading for just 3.25x earnings, the market assumes that VAALCO’s recent results will be a one-time event. If this proves not to be the case, it could continue to climb.
Harrow Health (HROW)
Harrow Health (NASDAQ:HROW) is the kind of stock that doesn’t appear impressive if pulled up on a stock screener. However, dive into the details, and you can see why this healthcare play, which has tumbled in recent months, could ultimately make a “to the moon” move.
The company, which operates an ophthalmic (eye health) pharmacy, also holds interests in several clinical-stage biotech firms. Per a Seeking Alpha commentator, these stakes could collectively have a value higher than that of the HROW stock price.
That’s not all. Harrow is also moving into branded pharmaceutical products. It’s not guaranteed its move into this area will pay off, but if it does, the company could see a big increase in its profitability — justifying a move to prices many times what the stock trades for at present. Consider this another micro-cap name to either buy now, or add to your watchlist.
Micro-Cap Stocks to Buy: GEE Group (JOB)
GEE Group (NYSEAMERICAN:JOB), a staffing firm, is not without its flaws. While this industry has crashed due to the tight U.S. labor market, it’s very cyclical. Not to mention, low profit margins and little economic moat.
So then, why do I consider this one of the micro-cap stocks with moonshot potential? Its super-low valuation. As one micro-cap investment fund argued in a letter to its limited partners, JOB stock trades at half the valuation of its peers. The company has also cleaned up its once over leveraged balance sheet.
If it can continue to report positive earnings, it may move higher due to multiple expansion. Trading for just 3x 2022 earnings, even if a recession dents profitability, there’s still upside for GEE Group if its earnings fall from 19 cents to 8 cents per share next year (implied multiple of 7x).
KonaTel (OTCMKT:KTEL) is a small telecom company that trades over-the-counter (OTC). Even more under-the-radar than the micro-cap stocks listed above, it’s a name worth looking into. Why? It’s tapping into a lucrative niche within the telecom space: government-subsidized phone and mobile data service.
KonaTel provides services under both the Affordable Connectivity and Lifeline programs. Its involvement in this space was key in the high revenue growth (76.7%) it reported in its first quarter 2022 results. It stands to see continued high growth, which due to its subsidized nature could be less at-risk during an economic downturn.
At around breakeven levels today, a further scaling up will bring it to the point of consistent earnings. Knocked lower this year after spiking last year, KTEL stock has started to surge again recently, due to increased chatter within the micro-cap “fintwit” community. Now may be the time to consider it.
Micro-Cap Stocks to Buy: vTv Therapeutics (VTVT)
Biotech is a great area to look for moonshot stocks. There are scores of micro-cap biotech stocks. Yet among many options out there, vTv Therapeutics (NASDAQ:VTVT) may be one of your better options.
That’s the view of InvestorPlace’s Larry Ramer, who recently made the case why VTVT stock (down 48% year-to-date) has been oversold. Mainly, due to the progress it’s making with its Type 1 diabetes treatment. The company is in active talks with third-parties about potential licensing/partnership deals for the candidate, which has breakthrough designation from the FDA.
Further progress on this could result in a big move higher for shares. vTv’s low cash position ($12.1 million) may be cause for concern. Still, the stock’s current low market capitalization ($35 million) likely prices-in the chance it engages in the dilutive sale of more shares to shore up its balance sheet.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.