Sometimes, you need a big score to turn the game around and that’s the case here with small-cap stocks with upside potential. Ordinarily, it’s better to acquire shares of large-capitalization companies. These entities typically have established businesses, translating to predictable revenue and earnings.
On the other hand, we have the small caps. First off, a lot of these entities don’t even have earnings. Instead, they’re focused on business expansion, hoping to build the bottom line later. Second, they tend to be volatile. Maybe they’ll make it big or maybe they’ll fold. It’s this uncertainty that makes these company shares so darn cheap.
At the same time, this lack of predictability means that should the stars align, the upswing could be tremendous. On that note, below are small-cap stocks with upside potential to consider.
ACM Research (ACMR)
Based in Fremont, California, ACM Research (NASDAQ:ACMR) falls under the semiconductor equipment and materials sector. Per its public profile, ACM develops, manufactures and sells single-wafer wet cleaning equipment. This specialized product category enables enhancement of the manufacturing process and increases yield for integrated chips worldwide.
Last year, the global wafer cleaning equipment market reached a valuation of $4.23 billion. By 2030, the sector could expand to $5.77 billion, representing a compound annual growth rate (CAGR) of 4.5%. Financially, ACM has been hitting out of the park, with an average positive earnings surprise of 144.53%.
In the trailing 12 months, the company posted net income of $87.64 million on revenue of $635.66 million. At the moment, the quarterly revenue growth rate (YOY) stands at 105%.
For fiscal 2024, covering experts believe earnings per share could rise to $1.74 on sales of $698.81 million. That comes out to 6.75% growth in the bottom line from last year, whereas the top line would see 25.3% growth. At this rate, it’s one of the small-cap stocks with upside potential.
IonQ (IONQ)
Based in College Park, Maryland, IonQ (NYSE:IONQ) operates in the computer hardware sector. Per its corporate profile, IonQ develops general-purpose quantum computing systems. Specifically, it sells access to quantum computers of various qubit capacities. The projected market is massive, with some experts calling for a sector size of $6.5 billion by 2028. That would come out to a CAGR of 48.1% from 2023.
What’s especially enticing about IONQ is that we’re very much in the early innings. At some point down the line, the quantum platform could be the new standard, yielding explosive gains in productivity. Therefore, acquiring IONQ now – when it only has a market cap of less than $2 billion – seems quite tempting.
On a TTM basis, IonQ incurred a net loss of $170 million on revenue of $25.34 million. While diminutive, the quarterly revenue growth rate currently stands at 76.9%. For fiscal 2024, analysts anticipate that the top line could rise to $39.47 million. If so, that would imply 79.1% growth. In fiscal 2025, revenue could reach $82.38 billion. Thus, IONQ is one of the small-cap stocks with upside potential.
AST SpaceMobile (ASTS)
Headquartered in Midland, Texas, AST SpaceMobile (NASDAQ:ASTS) falls under the communication equipment category. Along with its subsidiaries, AST develops and provides access to space-based cellular broadband networks for smartphones. Notably, its namesake platform provides broadband services to users who are out of terrestrial cellular coverage. It’s one of the more exciting names within the burgeoning space economy.
To be sure, AST presents high risks. For example, from the second quarter of 2023 to Q1 2024, the company’s average bottom-line surprise came out to 9.48% below breakeven. Over the past 12 months, AST’s net loss landed at $90.97 million on revenue of only $500,000. On paper, that doesn’t sound good at all, especially since shares trade at a whopping 877X trailing-year sales.
Nevertheless, some patience could go a long way. In fiscal 2024, analysts anticipate a loss per share of 76 cents, a big improvement over last year’s loss of $1.07. Moreover, sales could skyrocket to $55.23 million, with a blue-sky target of $113 million. In fiscal 2025, the top line could rise again to $253.88 million. For the adventurous, it’s one of the small-cap stocks with upside potential.
On the date of publication, Josh Enomoto did not have (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.
