Small-cap stocks, typically companies with a market cap under $3 billion, have historically outperformed large-cap stocks over the long term. Their high growth potential makes them appealing to investors seeking higher returns.
However, small-cap stocks are highly volatile and carry greater market risk. That means the key challenge for investors is finding stocks with solid fundamentals and high growth potential. To help with this, I used Barchart’s Stock Screener Tool to identify small-cap stocks rated as “Strong Buy” by analysts, with an expected upside potential of over 100%. Two standout picks emerged: GigaCloud Technology (GCT) and Cleanspark (CLSK).
Let’s examine these companies more closely and explore why they might deliver substantial returns in the future.
Small-Cap Stock #1: GigaCloud Technology (GCT)
GigaCloud Technology (GCT) is emerging as a leader in the B2B e-commerce landscape, connecting manufacturers, predominantly in Asia, with resellers across the U.S., Europe, and Asia. With its record-breaking financial performance in 2024, the company’s success signals a promising investment opportunity.
GigaCloud’s growth story is evident from its impressive revenue surge, which more than doubled in the first half of 2024. Operational efficiency has contributed to substantial growth in adjusted EBITDA, demonstrating the company’s ability to manage its costs while scaling rapidly.
One of the key highlights is the growth in the company’s gross merchandise value (GMV) on its GigaCloud Marketplace. The GMV exceeded $1 billion over the 12 months ending June 30, reflecting an 80% year-over-year increase. This growth reflects the increase in sellers and buyers on its platform. In Q2 2024, GigaCloud added 265 new sellers and 2,906 new buyers. The seller base grew by nearly 40%, while the buyer base expanded by a record 67% year-over-year, bringing the total to 7,257 active buyers by the end of the second quarter.
Additionally, buyer engagement on the platform is improving, with the average spending per buyer climbing 8.3% to over $151,000. This trend reflects the increasing value GigaCloud provides to marketplace participants, solidifying its position as a leading player in the B2B e-commerce space.
To support its growing marketplace, GigaCloud is aggressively expanding its fulfillment network. The company operates 42 strategically located fulfillment centers across five countries, with over 10 million square feet of warehouse space. In the U.S. alone, utilization rates for these centers are above 90%, showcasing the high demand for its services.
Recently, GigaCloud acquired Noble House, adding 2.4 million square feet of warehouse space to its network in the U.S. This acquisition will likely enhance the company’s ability to address growing demand, positioning it well for continued growth.
GigaCloud has disrupted the traditional B2B marketplace by offering a unique business model that connects buyers and sellers of large, bulky merchandise. This approach has allowed the company to grow its service and product revenue at a steady pace. Despite macroeconomic uncertainties and high ocean shipping costs, GigaCloud has proven its resilience, underscoring its insulation from some of the challenges traditional e-commerce players face.
Analysts are optimistic about GigaCloud’s future. Wall Street has given GCT stock a “Strong Buy” consensus rating. Over the past year, the stock has gained 119%, and analysts have set an average price target of $47.75, implying a solid 143% upside potential from current levels.
Small-Cap Stock #2: CleanSpark (CLSK)
CleanSpark (CLSK) is a Bitcoin (BTCUSD) mining company that is expanding rapidly and delivering solid revenue growth. The company recently reported quarterly revenues of $104.1 million, a staggering 129% increase compared to the same period last year, showcasing its rapid growth and solid footing in the industry.
As one of the top Bitcoin miners, CleanSpark’s operations have thrived in 2024, marked by significant advancements in both capacity and efficiency. The company increased its mining hash rate — the measure of computational power used for mining — by 24% in the most recent quarter. Further, its operational efficiency has improved by 21%. This growth is driven by the expansion of its Bitcoin mining facilities in Mississippi and Georgia, with plans to broaden its footprint into Tennessee and Wyoming.
CleanSpark demonstrated resilience with its efficient mining operations, despite the challenges related to the Bitcoin halving event. Despite a 50% reduction in block rewards, the company managed to mitigate revenue impact by mining 1,583 Bitcoins during the period. Moreover, ongoing upgrades to its mining fleet reinforce CleanSpark's commitment to maintaining the most efficient mining operations.
Financially, CleanSpark has a strong balance sheet, with $129.2 million in cash reserves and $413 million in Bitcoin holdings. The company's recent partnership with Coinbase (COIN) will help it capitalize on future growth opportunities at a low cost of capital.
Wall Street analysts have expressed optimism about CleanSpark's prospects, reflecting in the stock's “Strong Buy” consensus rating. With an average price target of $22.50, analysts anticipate a significant upside potential of 126% from current levels.
