With the major indexes at or near record highs, it’s been easy to overlook the performance of the small-cap Russell-2000 Index. While the index is “only” up about 5% in 2024, it’s up 21% in the past 12 months, and is slowly starting to catch up to the market rally. With that in mind, we’re looking at seven small-cap stocks that Wall Street loves.
Growth-oriented investors frequently look at small-cap stocks. This category of stocks gives investors a chance to turn a modest investment into outsized gains. However, those potential rewards come with significant risks.
For example, many of these companies aren’t profitable yet and that means they may not have much analyst coverage. That’s one of the appealing features of the stocks on this list. They have a level of analyst coverage that helps give retail investors a sense of where institutional investors may be looking to put their money.
Evolv Technologies (EVLV)
Evolv Technologies (NASDAQ:EVLV) is a technology company that uses next-generation security technology featuring AI-based weapons detection to enhance safety experiences while providing more ease of movement. The company’s feature product is its Evolv Express system.
The company is coming off a record year of growth in which it grew revenue by 46%, added approximately 300 new customers in 2023, and surpassed over one billion visitors scanned. The company serves many niches including sports and entertainment venues, hospitals, churches, and schools.
Evolv’s business model creates a strong base of annual recurring revenue (ARR). At the end of 2023, that amounted to approximately $75 million, a 120% year-over-year increase.
Evolve is not yet profitable, and even if they hit their target to improve EPS by 40%, they won’t be until at least 2025. But the company says it is well capitalized and believes it will be able to get to profitability without any additional capital.
Analysts give EVLV stock a $7.08 price target that would be 59.18% growth. And the company has a Strong Buy rating from six out of six analysts.
urban-gro (UGRO)
The next name on this list of small-cap stocks Wall Street loves is urban-gro (NASDAQ:UGRO). The company is a professional services consulting company that works with clients to design and engineer facilities in healthcare and other-end markets, including indoor controlled environment agriculture (CEA) applications.
That brings cannabis into the conversation. The company’s CEA experience is well-suited to the needs of cannabis dispensaries. Improvement in that sector is part of the company’s plans for organic growth in 2024. However, the company acknowledges that several key steps would have to be taken, none that seem likely in an election year.
In March, the company delivered a disappointing earnings report missing on both the top and bottom lines. UGRO stock dropped 24% after the report.
Nevertheless, the company enjoys favorable analyst sentiment that includes a $4.74 price target and a Strong Buy rating from four out of four analysts.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) is a leading wafer packaging and cleaning company for the semiconductor industry. With the super cycle in the chip sector, it’s easy to see why ACMR stock is one of the small-cap stocks Wall Street loves.
The stock is up 466% in the last five years but is still down about 35% from its all-time high set in 2021. With a $1.6 billion market cap as of this writing, the company isn’t going to deliver the explosive grwoth of a stock like Nvidia (NASDAQ:NVDA). But the company is attractively valued with a forward P/E of around 23x and projections for strong revenue and earnings growth.
That means the company’s stock price of $29.41 feels closer to a floor than a ceiling. In the next 12 months, analysts are forecasting that ceiling to be around $37.95 which would give investors 30% growth. And seven out of seven analysts give ACMR stock a Strong Buy rating.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ:SOUN) is working to create generative AI solutions with a goal of cracking the code on conversational AI. This is the step where AI mimics human language and speech patterns. The company’s clients currently include hospitals and data centers, but it’s making inroads with the automotive industry which may set the company up for years of future growth.
With a generative AI arms race developing, it’s not surprising that SOUN stock is up 194.5% in the last 12 months. However, what may surprise you is that a recent filing showed that Nvidia was investing in the company. You don’t have to connect many dots to assume that Nvidia believes SoundHound is on the right track.
Analysts are bullish on SOUN stock with a $7.15 price target that would be a 21% gain. Plus, four out of seven analysts give the stock a Strong Buy rating.
Worthington Steel (WS)
Worthington Steel (NYSE:WS) became a stand-alone spin-off of Worthington Industries in December 2023. That doesn’t give investors much of a track record, but there’s reason to believe that this is a company to watch. Worthington Steel specializes in processing carbon flat-rolled steel processor, electrical steel lamination, and tailor welding.
It’s all about infrastructure. Iron ore demand is supposed to surge in 2024 due to its essential role in steelmaking. The company’s electrical steel will be needed in the electric vehicle sector as well as to upgrade our country’s aging electric infrastructure.
Worthington is not widely covered by analysts yet. But one out of two analysts give WS stock a Strong Buy rating.
Structure Therapeutics (GPCR)
I first came across Structure Therapeutics (NYSE:GPCR) in December 2023 and it was easy to see why analysts were interested in GPCR stock. The clinical –stage biotech company’s lead candidate GSBR-1290 is an oral GLP-1 receptor agonist that is being tested as a treatment for diabetes and obesity.
The drug is in Phase 2 trials and is expecting results later this year. But if the company is successful, it could be a sleeper in this highly competitive market.
One concern about clinical-stage biotech companies is that many are still in the pre-revenue stage. However, the company reported that at the end of 2023, it had $467 million in cash on hand. Structure believes this is enough to fund operations through 2026 which will align with when GSBR-1290 may be commercially available.
Analysts remain bullish on GPCR stock with a price target of $81.17 which is a gain of 86% from the current GPCR stock price. Six out of six analysts give the stock a Strong Buy rating.
Analysts remain bullish on GPCR stock with a price target of $81.17 which is a gain of 86% from the current GPCR stock price. Six out of six analysts give the stock a Strong Buy rating.
Ero Copper (ECO)
In the metals and mining industry, there’s a lot of focus on gold. But you shouldn’t forget about copper. And that’s a good reason to keep Eco Copper (NYSE:ECO) on your watchlist. The company is a high-margin clean copper producer that operates in Brazil. The company has one active mine and another one that is expected to start production in April 2024.
Eco says it’s on a path to doubling its copper production by 2025. That will be good timing. Copper was expected to have a strong year in 2023, but supply outpaced demand as key industries, such as electric vehicles stalled out. However, most analysts believe that copper prices will move significantly higher in the next two years as the supply-demand dynamic changes in favor of rising copper prices.
Analysts have a consensus rating of Hold on ECO stock, but three out of 11 analysts do give the stock a Strong Buy rating.
On the date of publication, Chris Markoch had a LONG position in EVLV. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
