The Russell 2000 index, often called the small-cap index, is expected to gain about 19.6% in 2024. Most of this gain has come in the last six months, and the clarity following the US presidential election is causing a rally in the sector.
The position in favor of small-cap stocks stems from lower interest rates and hopes that Trump’s tax cuts will become permanent. Many of these companies are still in the growth phase and rely on borrowing to fuel that growth.
With interest rates at 20-year highs, companies have found it harder to access capital. Many of these companies will face devastating consequences if the corporate tax rate increases.
Now that conditions appear more favorable, it’s time to pay attention to small-cap stocks. Here are three that stand out.
This biopharmaceutical company is a leader in gene therapy
Rocket Pharmaceuticals Inc. NASDAQ: RCCT is a leader in gene therapy, with a focus on rare, devastating diseases, especially in children, who account for 50% of rare disease patients. According to Global News Wire, the rare disease treatment market is expected to grow from $161.4 billion in 2020 to $547.5 billion by 2030, at a compound annual growth rate of 13.1%.
Rocket Pharmaceuticals Today
Rocket Pharmaceuticals
(As of 11/27/2024 ET)
- 52 week range
- $12.62
▼
$32.53
- Target price
- $51.00
Rocket Pharmaceuticals’ multi-platform approach allows it to select the most practical gene therapy to treat a target disease. Although the promise of gene therapy is real and enormous, many gene therapy companies are still in the pre-revenue stage. The rocket is no different.
But that may change. The company has more than six clinical trial programs underway, with two of these programs rapidly approaching regulatory filing and launch. This is the rocket fuel that has analysts giving RCKT shares a Moderate Buy rating with a $51 price target, more than 260% above the November 26, 2024 share price.
This Canadian Miner Is Poised to Benefit from Rising Lithium Demand
Lithium Americas Corp. New York Stock Exchange: LAC is the next company on this list of small-cap stocks poised for strong growth in 2025. The lithium market in 2024 is influenced by supply and demand. In particular, there is too much supply and not enough demand.
Lithium America Today
Lithium America
(As of 11/27/2024 ET)
- 52 week range
- US$2.02
▼
$7.71
- Target price
- $5.63
But when it comes to lithium’s role in America’s supply chain, it’s not hard to see why the fortunes of this all-American North American lithium mining operation are expected to change in 2025. Many US companies are looking to secure a reliable source of lithium.
To this end, in October 2024 General Motors Company. New York Stock Exchange: CEO announced it will contribute a total of $625 million in cash and letters of credit to a new joint venture with the company’s Thacker Pass project. That’s in addition to a $2.26 billion loan from the U.S. Department of Energy (DOE) that will allow Lithium Americas to build processing facilities capable of producing 40,000 tons of battery-grade lithium carbonate annually.
Following the announcement, many major commodity stocks rose, with LAC shares up about 9.5%. However, Lithium Americas is still in the pre-earnings phase, meaning analysts still give the stock a consensus recommendation of Hold. However, the $5.63 price target is more than 45% above the stock’s price on November 26, 2024.
Investing in artificial intelligence and the gig economy
Fiverr International Ltd. New York Stock Exchange: FVRR is an international marketplace that allows freelancers to sell their services to employers. The company accidentally went public in 2019, right before the explosion of remote work due to the global pandemic. FVRR stock was part of the meme stock move and fell significantly from its high price of over $320 per share.
Fiverr International today
Fiverr International
(As of 11/27/2024 ET)
- 52 week range
- $18.83
▼
$33.90
- P/E ratio
- 126.27
- Target price
- $31.60
However, as we head into 2025, there are a few key reasons to keep an eye on FVRR stock. The first is AI. That is, freelancers on the platform are becoming more experienced and specialized in the services they offer, especially as demand for artificial intelligence services grows. At the same time, its key customer base consists of larger enterprises.
Another reason to believe in Fiverr is that the gig economy is unlikely to disappear. According to a Lending Tree survey, many Gen Z employees are now committed to the gig economy, with more than half of the demographic having at least one side hustle.
The company has many competitors, but also has a significant market share. With a price of over $33 per share and growth of over 21% in 2024 as of November 26, FVRR’s price may look ideal. However, with earnings per share expected to nearly double next year, Fiverr is one of the small-cap stocks to watch.
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