Micro-cap stocks often get a bad rap, and for good reason. Many of these penny stocks are highly speculative and risky bets that can quickly go south. However, amid the sea of questionable micro-cap stocks, there are a few hidden gems with serious long-term potential. I believe the three stocks I’ll discuss today have the potential to possibly reach blue-chip status.
I think it’s worth allocating a small portion of your portfolio to these stocks. While there are no guarantees in the stock market, these companies have the right ingredients to deliver outsized returns in the coming years. If their growth trajectories continue, today’s prices may look like incredible bargains in hindsight.
That said, it’s crucial not to go overboard with position sizing. Micro-cap stocks should only make up a small percentage a diversified portfolio. There is always the risk that these companies could see their momentum could fizzle out. Nonetheless, I’m optimistic that interest rate cuts on the horizon. These cuts could supercharge the growth of the following three small-cap stocks.
OppFi (OPFI)
OppFi (NYSE:OPFI) is still quite unknown in the fintech world, and I believe the company’s stock is poised for significant growth in the coming years. In Q1 2024, OppFi delivered strong results, with a 5.8% increase in total revenue to $127.3 million and profitability more than doubling year-over-year. Credit performance also improved, with the net charge-off rate as a percentage of total revenue decreasing by 1.1 percentage points.
The fintech industry is projected to reach $851 billion by 2030, and OppFi is well-positioned to capitalize on this growth. Moreover, the anticipated interest rate cuts could boost borrowing and credit card usage. This is mainly why I think OPFI stock could outperform in the long run.
The stock has already gained 74% over the past year, but I believe OppFi’s valuation remains attractive. Analysts seem to agree. The average price target is at $5.5, implying almost 60% upside from here.
ASP Isotopes (ASPI)
ASP Isotopes (NASDAQ:ASPI) is an advanced materials company that I’m quite bullish on right now. Much of this is due to the company’s total addressable market, and how many industries they can target. The company’s Aerodynamic Separation Process enriches isotopes for healthcare, technology, and green energy applications. ASP aims to produce silicon-28. This isotope is crucial for next-gen quantum computing and AI advancements.
Importantly, ASP recently secured a deal to supply enriched silicon-28 to a major industrial gas company. The company is also targeting the nuclear medicine industry, where demand for therapeutic isotopes is rising. The use cases with this company’s core products are impressive, to say the least.
That said, this is a very niche play right now. The markets ASP serves have immense potential, but they are not mature markets right now.
The stock has already surged over 510% over the past year, but I believe it has room to run much higher. The company will still need to ramp up production and secure more supply deals. And it’s worth noting that this is still a very early-stage play, with ASP producing an operating cash flow loss of $4.7 million in 2023. This is definitely a stock that could see its appreciation compound more if it succeeds, but I’d still tread carefully.
Sow Good (SOWG)
Sow Good (NASDAQ:SOWG) is a pioneer in the freeze-dried candy market. The company offers consumers innovative treats that pack an intense flavor punch in a light, crunchy texture. By removing the water content, Sow Good can craft candies with fewer artificial additives that still satisfy sweet cravings in smaller portions. I believe this positions the company to ride the “better-for-you” snacking mega trend as consumers seek out permissible indulgences.
The global freeze-dried food market is projected to surge, and Sow Good is poised to capture a sweet slice of this pie. And boy is this small-cap delivering mouthwatering growth!
Sow Good’s Q1 2024 revenue skyrocketed 20% sequentially to $11.4 million, a staggering leap from less than $200,000 a year ago. Gross profit hit $4.6 million with a 40.6% margin, while adjusted EBITDA turned positive at $2.45 million. I believe analysts are correct in assuming near-end 2025 sales could cross $100 million.
The company is also aggressively expanding its production capacity. Sow Good recently surpassed 4.5 million units, with plans to hit 30 million by year-end. Major new retail launches include Kroger (NYSE:KR), Dollar General (NYSE:DG), 7-Eleven (OTCMKTS:SVNDY), and Ross (NASDAQ:ROST). If the product is indeed so good, I think it has the potential to be a household name someday.
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On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.