Small-cap stocks, typically valued between $300 million and $2 billion, often promise notable growth potential and superior long-term returns. Now, with interest rate cuts on the horizon, investors are speculating which high-growth small-cap stocks may thrive.
Unlike their larger counterparts, small caps face challenges in securing financial resources and may have to resort to higher-cost borrowing, potentially stifling growth. However, a potential decrease in interest rates could unlock substantial growth opportunities, especially for overlooked small caps that have yet to gain investor attention.
The Federal Reserve’s higher-for-longer policies have hit small caps hard. The Russell 2000 index, a benchmark for small-cap stocks, has remained almost flat year-to-date (YTD). In contrast, the S&P 500 and Nasdaq 100 have surged with gains of 16% and 20%, respectively.
However, this dip in small caps could present a buying opportunity for long-term investors. Today, we introduce three high-growth small-cap stocks to potentially emerge as standout performers, representing hidden gems for savvy investors.
ChargePoint Holdings (CHPT)
We start our exploration of high-growth small-cap stocks with ChargePoint Holdings (NYSE:CHPT), a front-runner in electric vehicle (EV) charging technology. Positioned to benefit from the rapid expansion of the EV market, ChargePoint is poised for explosive growth as 70% of U.S. drivers are considering EV purchases.
Despite an 18% year-over-year (YOY) revenue dip to $107.0 million in the first quarter of fiscal 2025, ChargePoint’s financial position remains solid. It has $292.3 million in cash and equivalents, an undrawn $150 million credit facility, and no debt maturities until 2028. Moreover, the company has improved its net loss per share to 17 cents from 23 cents the previous year.
Meanwhile, management’s revenue guidance of $108-$118 million fell short amid broader economic challenges. Nevertheless, a strategic partnership with LG Electronics and collaboration with Porsche Cars North America (PCNA), aiming to expand its charging network to over 100,000 points across North America, solidify ChargePoint’s market position.
So far this year, CHPT stock has declined 29%. Analysts have set a bullish 12-month median target of $2.75 for CHPT stock, suggesting over 70% potential upside. In other words, ChargePoint stock is an intriguing option for growth-focused small-cap investors whose portfolios can handle short-term volatility.
Exscientia (EXAI)
The U.K.-based biotech company Exscientia (NASDAQ:EXAI) is the second name among our high-growth small-cap stocks. It is at the forefront of artificial intelligence (AI) healthcare stocks over the other side of the Atlantic.
Exscientia’s AI platform accelerates the discovery and development of new medicines, leveraging machine learning for medical data analysis. This positions Exscientia to capitalize on the rapidly growing field of AI-driven drug discovery.
Exscientia, like many pre-revenue companies, doesn’t report profits yet. Their focus is on developing their pipeline and forging partnerships with pharmaceutical giants. However, their recent first-quarter earnings report in May 2024 showed revenue reached $6.7 million, a slight decrease YOY. Net loss per share dropped down to 21 cents from 39 cents as a result of a significant reduction in its operating cash burn.
Exscientia has forged strategic alliances with major pharmaceutical players to accelerate drug discovery. Collaborations with pharma heavyweights like the Switzerland-based Roche (OTCMKTS:RHHBY) and Germany-headquartered Bayer (OTCMKTS:BAYRY) could potentially validate its AI platform and provide access to expertise and funding.
These partnerships could also mean upfront payments and potential milestone payments based on successful drug development. Thus, such a network of partnerships is crucial for Exscientia to translate its AI technology into commercially viable treatments.
Since January, EXAI stock has declined 16% YTD. However, the 12-month median price forecast for EXAI stands at $9.00, suggesting an upside potential of 67% from current levels.
Viridian Therapeutics (VRDN)
As we conclude our discussion on high-growth small-cap stocks, let’s take a closer look at Viridian Therapeutics (NASDAQ:VRDN). Investors are paying attention to this biopharmaceutical company for its pipeline, such as the VRDN-001, an investigational drug primarily aimed at treating Thyroid Eye Disease (TED).
In its recent earnings report, Viridian announced a net loss of 79 cents per diluted share, an improvement from a loss of $1.61 reported in the same period last year. Moreover, Viridian maintains $613.2 million in cash and equivalents, ensuring funding into the second half of 2026.
In 2024, Viridian faced challenges from market dynamics and safety concerns surrounding biotech heavyweight Amgen’s (NASDAQ:AMGN) Tepezza, a similar TED treatment. Tepezza’s post-approval safety issues and efficacy questions negatively impacted VRDN stock. Nevertheless, Viridian maintains optimism as it continues to pursue FDA approval for VRDN-001 by 2026 and advances VRDN-003 Phase 3 trials for chronic TED according to plan.
VRDN stock has been under pressure since the start of the year, with its price down over 43% YTD. Nonetheless, Wall Street remains bullish, with a median 12-month price forecast of $34.00. That implies more than a 175% upside potential for Viridian shares. If you can handle volatility, we believe VRDN stock deserves attention as a high-growth small-cap stock.
— Tezcan Gecgil
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Source: Investor Place