With growth stocks still driving the broad market action, savvy investors are on the lookout for any remaining “hidden gems” that might still deliver multibagger returns - without costing an arm and a leg. Stocks under $5 are one place to start the search; while low-priced growth names can be risky, it's also how some of the mega-cap members of the Magnificent Seven got their start.
Against this backdrop, we've scouted out three small-cap stocks that have outperformed their parent Russell 2000 Index (RUT) by a wide margin over the last month - but still have share prices under the $5 mark. Plus, analysts are pretty bullish on these stocks, slapping them with “Strong Buy” ratings and predicting more upside to come over the next year.
Despite being in the early stages, each company has its own set of catalysts that could spark rapid growth as we move into 2024 and beyond. Of course, there's always risk when you swim in the shallow end of the Wall Street investing pool - but for investors willing to take a bit of a gamble, here are three small-but-mighty growth names worth a look right now.
1. SoundHound AI Stock
SoundHound AI (SOUN) is revolutionizing the way we interact with technology through its advanced voice recognition platform. Specializing in natural language processing, the company's AI-driven solutions are designed to facilitate seamless conversational experiences across a diverse range of applications.
The big news that got everyone talking earlier this month was when Nvidia (NVDA), the AI chip giant, revealed a $3.7 million stake in SoundHound. Nvidia's bet on SoundHound isn't just pocket change; it's a sign that they see big things ahead for this small AI player.
Thanks in part to that high-profile boost from Nvidia, SOUN stock has more than doubled in the past month - but you can still scoop up the shares for less than $4 each. By contrast, the Russell 2000 is up about 2% over the last month.
SOUN's latest earnings report was a mixed bag, as the company beat on revenue but reported a wider-than-forecast loss of $0.09 per share. Looking ahead, the company said it expects to be adjusted EBITDA positive for Q4, with those results due out on Feb. 29.
To help drive growth, Soundhound is teaming up with the likes of Jersey Mike's and White Castle to expand its AI food ordering services - plus, they're partnering with an electric vehicle maker from Turkey called Togg on a voice assistant.
All six analysts tracking SOUN have given the stock a “Strong Buy” rating. The $4.43 mean price target implies expected upside of more than 12% from current levels.
2. Beyond Air Stock
Beyond Air (XAIR) is on a mission to shake up the medical scene with its innovative inhaled nitric oxide therapy, aimed at tackling a range of respiratory and cardiac issues. Their secret weapon? The LungFit platform is a cutting-edge system designed to deliver nitric oxide gas for patients to breathe in.
After a lengthy slide in the share price through most of 2023, XAIR is back on the upswing in 2024. The stock has rallied 25% in the past month, easily outpacing the RUT index.
In Beyond Air's latest earnings report on Feb. 12, they reported a loss of $0.50 per share - which beat the Street's expectations, since analysts were bracing for a $0.61 per-share loss. The stock rallied in response, as the bottom-line beat helped make up for a miss on revenue.
The analyst crowd is feeling optimistic, with all four covering the stock giving XAIR a “Strong Buy” rating and setting an average price target of $11.50. With the shares trading below $2, that's a premium of 553% from here.
3. Xeris Biopharma Stock
Xeris Biopharma (XERS) is stirring things up in the pharma world with its focus on creating injectable and infusible drug formulations that are ready to use right out of the box. They're leveraging their in-house tech, XeriSol and XeriJect, to make life easier for everyone by sidestepping some of the hassles tied to traditional aqueous drug formulations, providing enhanced stability and solubility.
Since the beginning of the year, XERS has seen its share price soar, likely thanks to a new licensing deal with Amgen (AMGN) that puts their XeriJect tech in the spotlight. In the past month alone, the stock has rallied more than 23%.
In its Q3 2023 report, XERS reported a narrower-than-forecast loss of $0.09 per share, and topped revenue estimates at $48.32 million. Q4 results are expected on March 13, with analysts targeting another per-share loss of $0.09 (improved from $0.10 a year ago) and revenue of $43.55 million.
Wall Street is feeling pretty bullish, with all five analysts in coverage giving XERS a “Strong Buy” rating, with an average price target of $4.60. That implies expected upside of nearly 53% from current levels.
