Microcap stocks, often dubbed the "hidden gems" of the investment world, are companies with market caps ranging from $50 million to $300 million. While investing in these stocks carries inherent risks, their significant potential for substantial gains remains a captivating lure for investors.
Moreover, Barron’s recently highlighted similarities between microcaps and private equity, suggesting that these small-scale companies offer comparable growth potential to startups.
Here are three microcap stocks with immense upside potential, as projected by analysts.
Microcap Stock #1: Bit Digital
Valued at $186.4 million by market cap, New York-based Bit Digital, Inc. (BTBT) serves as a platform for digital assets and artificial intelligence (AI) infrastructure. The company conducts Bitcoin (BTCUSD) mining operations across the U.S., Canada, and Iceland. Furthermore, the company engages in treasury management activities and Ethereum (ETHUSD) staking endeavors.
Shares of Bit Digital have surged 5.3% over the past 52 weeks and 22.6% over the past month.
In terms of valuation, the stock is priced at 4.06 times sales, lower than its own five-year average of 6.68x.
On March 18, Bit Digital reported its fiscal 2023 earnings results. Its revenue surged 39% annually to $44.9 million, with most of it coming from bitcoin mining. Adjusted EBITDA and adjusted EPS for the year amounted to $12.4 million and $0.12, respectively. Furthermore, the company earned 1,507.3 bitcoins, marking a notable 21% year-over-year increase.
In 2023, Bitcoin prices recovered from the prior year’s lows, paving the way for record-breaking highs in 2024. Throughout the year, Bit Digital made strategic moves to strengthen its financial foundation, gearing up for the 'halving' event of April 2024. As 2023 wrapped up, the company boasted substantial cash reserves of $81.2 million and a debt-free balance sheet.
For fiscal 2024, management aims to expand its active bitcoin mining fleet to approximately 6.0 exahashes per second (EH/s) and focus on maintaining a strong and flexible balance sheet. Plus, Bit Digital aims to diversify and expand its Bit Digital AI division, with a target of reaching $100 million in annualized revenue by 2024.
Analysts tracking Bit Digital project the company to report a GAAP profit of $0.02 per share in fiscal 2024, compared to a loss of $0.16 per share in 2023.
Notably, the company is expected to release its Q1 earnings results today, May 15, after the market closes. Wall Street is looking for a profit of $0.01 per share, on average. BTBT stock is up more than 2% ahead of tonight’s report, suggesting that traders are optimistic ahead of the Q1 results.
Bit Digital stock has a consensus “Strong Buy” rating overall. Out of the four analysts covering the stock, three recommend a “Strong Buy,” and the remaining one gives a “Moderate Buy” rating.
The average analyst price target of $5.08 indicates potential upside of 119.9% from the current price levels. The Street-high price target of $6 suggests that the stock could rally as much as 159.7%.
Microcap Stock #2: Rigetti Computing
Berkeley-based Rigetti Computing, Inc. (RGTI) is an integrated systems company that specializes in constructing quantum computers and developing superconducting quantum processors essential for their operation. The company provides professional services encompassing algorithm development, benchmarking, quantum application programming, and software development. Its market cap currently stands at $209.7 million.
Shares of Rigetti Computing have rallied 137.9% over the past 52 weeks.
In terms of valuation, the stock is trading at 16.8 times sales.
On May 9, the company reported its Q1 earnings results, which fell short of Wall Street’s predictions on both the top and bottom lines. The stock dropped 9.4% in the next session as investors responded to the miss, though this kind of volatile price action isn’t out of the ordinary for RGTI.
Rigetti reported Q1 revenue of $3.1 million, which rose 38.7% annually. Also, its net loss per share narrowed to $0.14 from $0.19 in the year-ago quarter. As of March 31, its cash, cash equivalents, and available-for-sale securities totaled $102.8 million.
Second-quarter results could be stronger, as the company announced its third-ever Novera QPU sale in April. Analysts tracking Rigetti Computing project the company’s loss to narrow 37.7% in fiscal 2024 and improve another 33.3% in fiscal 2025.
Rigetti Computing stock has a consensus “Strong Buy” rating overall. Out of the three analysts covering the stock, two recommend a “Strong Buy,” and the remaining one gives a “Moderate Buy” rating.
The average analyst price target of $3.17 indicates a potential upside of 159.8% from the current price levels, while the Street-high price target of $3.50 suggests that the stock could rally as much as 185.7%.
Microcap Stock #3: X4 Pharmaceuticals
With a market cap of $165.5 million, Boston-based clinical-stage biopharmaceutical company X4 Pharmaceuticals, Inc. (XFOR) researches, develops and commercializes innovative therapeutics tailored for the treatment of rare diseases. Leading its pipeline is Mavorixafor, a small-molecule antagonist of the CXCR4 receptor undergoing development as a once-daily oral therapy for WHIM syndrome and specific chronic neutropenic disorders.
Shares of X4 Pharmaceuticals have climbed 18.5% on a YTD basis and 26.5% over the past six months.
On May 7, X4 Pharmaceuticals reported its Q1 earnings results. The company incurred a net loss of $51.8 million, or $0.26 per share, wider than its net loss of $24 million, or $0.16 per share, in the year-ago quarter. Despite being pre-revenue, the company remains optimistic about its ability to fund operations through 2025, supported by the $81.6 million in liquid assets it held as of March 31.
Plus, recent approval from the Food and Drug Administration (FDA) for its XOLREMDI (Mavorixafor) capsules to treat individuals aged 12 years and older with WHIM syndrome has further bolstered the company's positive outlook.
Analysts tracking X4 Pharmaceuticals expect the company’s loss to expand 8.8% year over year in fiscal 2024 and then narrow by 29% in fiscal 2025.
X4 Pharmaceuticals stock has a consensus “Strong Buy” rating overall. Out of the six analysts covering the stock, five recommend a “Strong Buy,” and the remaining one gives a “Hold” rating.
The average analyst price target of $4.12 indicates a staggering potential upside of 323% from the current price levels. The Street-high price target of $5.50 suggests that the stock could rally as much as 465.3%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
