2 Top Small-Cap Stocks to Buy Right Now

Unlike 2023, when large-cap stocks dominated, the market became slightly wider in 2024. In particular, the small-cap Russell 2000 has performed well over the past month, rising about 8% since February 1st. Large capital letters by a small margin since then.

There may be a number of reasons why this has occurred and it is likely to continue in the near future. One reason is that many large-cap stocks have become overvalued, causing investors to look elsewhere. Another reason is that a period of sustained economic growth coupled with the potential for environmental improvement has given investors more confidence in the growth prospects of small businesses.

Here are two top small-cap stocks for investors to consider.

1. Turtle Beach

turtle beach (NASDAQ:HEAR) is best known for its gaming headsets, but it also makes other gaming accessories such as microphones, mice, keyboards, and other devices. The stock has plummeted this year, up more than 70% year-over-year as of April 4, reaching $17.60 per share, with more room to operate. Analysts’ consensus price target is $24 per share, which would represent a 36% increase from current prices.

Turtle Beach generated profit of $8.6 million, or 47 cents per share, in the fourth quarter. That’s up from a net loss of $23 million in the same quarter a year ago. The company’s revenue declined slightly, but its bottom line grew thanks to cost savings of 17% compared to the previous year. But the biggest catalyst moving forward for Turtle Beach is the acquisition of its key competitor, Performance Design Products (PDP).

As PDP specializes in game controllers, this acquisition is expected to allow Turtle Beach to expand into new markets. Leveraging PDP, Turtle Beach expects to achieve cost synergies of $10 million to $12 million, revenue of $370 million to $380 million, and adjusted EBITDA of $51 million to $54 million in fiscal 2024. . The combined company’s revenue is expected to be approximately 43% higher than in fiscal 2023, and adjusted EBITDA is expected to surge more than 700% from $6.5 million in fiscal 2023. Importantly, all these figures include only the nine months that include the addition of PDP.

Turtle Beach calls this a groundbreaking acquisition, and it just might be. With a future price-to-earnings ratio of just 24, we see excellent growth ahead for Turtle Beach.

2. Skywater Technology

Skywater Technology (NASDAQ:SKYT) is a semiconductor foundry, which means it manufactures semiconductors for other companies and organizations. By offering a Technology-as-a-Service (TaaS) model, we work with companies in the aerospace & defense, healthcare, automotive, industrial, and consumer sectors to build their own chips. But SkyWater isn’t trying to compete with large foundries like Taiwan Semiconductor (NYSE:TSM). Rather, we work with small companies and startups.

One of our biggest customers is the federal government. Defense Microelectronics Activity (DMEA) has been certified as a Trusted Supplier by the U.S. Department of Defense. In the fourth quarter, SkyWater received $190 million in awards from DoD. The company is now heading into a record year with revenue of $287 million, a 35% increase over the previous year. SkyWater had a net loss of $31 million, or 68 cents per share, last year and had adjusted EBITDA of $37.2 million.

Going forward, the company sees the TaaS model, especially its Advanced Technology Services (ATS) business, as a growth driver. In its ATS business, SkyWater partners with customers and clients to co-develop innovative semiconductor solutions tailored to their needs. Much of ATS’s growth has been driven by expanding relationships with the federal government and DoD. Last year, the ATS business accounted for about 79% of total sales, and Skywater expects ATS development sales to grow by 10-20% in 2024.

Earlier this year, the company applied for funding through the federal CHIPS and Science Act to modernize and upgrade equipment and expand production at its manufacturing facility in Minnesota. Here we are working with the Ministry of Defense on semiconductor projects. If SkyWater receives funding, it could provide an additional boost to the company.

Skywater stock is up about 16% year to date and is trading at about $10.40 per share. Analysts set a consensus price target of $15 per share, which would represent a 43% increase from the stock’s current price. Given its unique niche and growing demand for semiconductor technology, SkyWater should continue to generate returns for investors.

disclaimer: All investments involve risk. Under no circumstances should this article be taken as investment advice or constitute liability for investment profits or losses. The information in this report should not be relied upon for investment decisions. All investors should conduct their own due diligence and consult their own investment advisors when making trading decisions.