U.S. stock markets have been witnessing an impressive rally since the beginning of 2023 barring some minor hurdles. Wall Street’s bull run has got an added boost this year, to the surprise of a large section of financial pandits, who indiscriminately warned of overvaluation.
Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have advanced 18.6%, 26.5%, and 29.1%, respectively. Most surprising fact is that the small-cap-centric Russell 2000 index has appreciated 20.5% this year. This index suffered a severe blow in the last two years.
Here, we recommend five small-cap stocks with a favorable Zacks Rank and solid upside potential for the short term. These are Talkspace Inc. TALK, Rayonier Advanced Materials Inc. RYAM, Castle Biosciences Inc. CSTL, Private Bancorp of America Inc. PBAM and Research Solutions Inc. RSSS.
Trump Tariff to Boost Small Businesses
Since the onset of the COVID-19 pandemic in March 2020, small businesses have suffered a lot. During the pandemic, the main concern was demand, as social distancing resulted in a slowdown in U.S. consumer spending, which hurt this segment. The global breakdown of supply-chain systems and the shortage of manpower have affected these companies the most.
Donald Trump’s implementation of tariffs on foreign products is primarily aimed at strengthening U.S. industries by forcing companies to bring back jobs to the country. Small businesses have no geographical diversification and depend on U.S. consumers.
Imposition of tariffs on foreign products, especially those used as inputs to final products will make cheaper imported goods (particularly Chinese inputs) more costly. This will help indigenous small businesses to achieve a level playing field.
Rate Cut to Benefit Small Businesses
After the pandemic, the major issue for U.S. small businesses was galloping inflation. This space suffered significantly due to a higher interest rate regime. The companies operate on a thin profit margin, and most new businesses take time to achieve profitability.
Small businesses are unable to pass on the total hike in input costs to their final products, taking a toll on their financial condition. Small businesses are generally dependent on cheap sources of credit for their survival. Therefore, a gradual decline in the benchmark interest rate will help this space immensely.
Russell 2000 Achieves a New Milestone
On Nov 26, the Russell 2000 index hits an all-time high of 2,439.02 before closing at 2,424.31. The index posted a new all-time high for the first time since Nov 8, 2021. On Nov 27, the small-cap-specific index recorded a new all-time of 2,449.86 before closing at 2,426.19. The above-mentioned two recent developments should benefit small businesses to a good extent in the near-future.
Buy 5 Small Cap Stocks With Solid Upside in the Short Term
These five stocks have strong growth potential for 2025 and have seen positive earnings estimate revisions in the last 30 days. Each of our picks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Talkspace Inc.
Talkspace operates as a virtual behavioral healthcare company in the United States. TALK offers psychotherapy and psychiatry services through its platform to individuals, enterprises, and health plans and employee assistance programs. TALK provides text, audio, and video-based psychotherapy from licensed therapists.
TALK offers Talkspace Employee Assistance Program (EAP) and Talkspace Behavioral Health plan (BH) and provides online therapy to members through BH and EAP offerings, and Talkspace for Business for members to access its platform services on a benefit plan paid by the enterprise. TALK serves its platform through third-party platforms or marketplace, such as Apple App Store and Google Play App Store.
Excellent Short-Term Upside for TALK Shares
Talkspace has an expected revenue and earnings growth rate of 23.4% and more than 100%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 29% over the last seven days.
The average short-term price target of brokerage firms represents an increase of 30.8% from the last closing price of $3.47. The brokerage target price is currently in the range of $5 - $3. This indicates a maximum upside of 44.1% and a downside of 13.5%.
Rayonier Advanced Materials Inc.
Rayonier Advanced Materials operates as a global supplier of cellulose specialties products, a natural polymer for the chemical industry. RYAM’s products include cellulose specialties primarily used in dissolving chemical applications; commodity viscose used in the manufacture of textiles for clothing and other fabrics, and in non-woven applications, absorbent materials comprising fibers for absorbent hygiene products and other products.
RYAM’s products are used in a wide range of industrial and consumer products such as filters, cosmetics and pharmaceuticals. RYAM’s production facilities are located primarily in Jesup, GA, and Fernandina Beach, FL.
Robust Short-Term Upside for RYAM Stock
Rayonier Advanced Materials has an expected revenue and earnings growth rate of 6% and more than 100%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 26.1% over the last 30 days.
The average short-term price target of brokerage firms represents an increase of 41.7% from the last closing price of $8.72. The brokerage target price is currently in the range of $13 - $12. This indicates a maximum upside of 49.1% and no downside.
Castle Biosciences Inc.
Castle Biosciences is a commercial-stage dermatological cancer company. CSTL is focused on providing physicians and patients, clinically actionable genomic information. CSTL provides testing solutions for the diagnosis and treatment of dermatologic cancers, Barrett's esophagus, uveal melanoma, and mental health conditions.
Huge Short-Term Upside for CSTL Shares
Castle Biosciences has an expected revenue and earnings growth rate of 48.9% and 96.3%, respectively, for the rest of 2024. The Zacks Consensus Estimate for 2024 earnings has improved more than 100% over the last 30 days.
The average short-term price target of brokerage firms represents an increase of 34.1% from the last closing price of $30.44. The brokerage target price is currently in the range of $50 - $32. This indicates a maximum upside of 64.3% and no downside.
Private Bancorp of America Inc.
Private Bancorp of America Private Bancorp of America provides banking products and services to individuals and businesses in California. PBAM offers checking and savings, money market, certificate of deposit, sweep, zero balance, and individual retirement accounts, unsecured lines of credit, personal credit lines, and term loans, additional services, such as direct deposits, online banking, ATM and debit cards, credit cards, savings/line of credit overdraft protection, and safe deposit boxes; and certificate of deposit account registry services.
Impressive Short-Term Upside for PBAM Stock
Private Bancorp of America has an expected revenue and earnings growth rate of 11.1% and 5.6%, respectively, for 2025. The Zacks Consensus Estimate for 2025 earnings has improved 1% over the last 30 days.
The average short-term price target of brokerage firms represents an increase of 28.8% from the last closing price of $49.70. The brokerage target price is currently in the range of $60 - $71. This indicates a maximum upside of 42.9% and no downside.
Research Solutions Inc.
Research Solutions delivers research information services and software to companies in Life Sciences and other research-intensive industries. RSSS provides services, such as document delivery, reprints and e-prints, and printing and reprint management. RSSS also prints copies of published materials of marketing departments, and other materials and provides other printing logistics products and services.
Astonishing Short-Term Upside for RSSS Shares
Research Solutions has an expected revenue and earnings growth rate of 10.1% and more than 100%, respectively, for the current-year (ending June 2025). The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 30 days.
The average short-term price target of brokerage firms represents an increase of 47.6% from the last closing price of $3.42. The brokerage target price is currently in the range of $6 - $4.35. This indicates a maximum upside of 75.4% and no downside.
Free: 5 Stocks to Buy As Infrastructure Spending Soars
Trillions of dollars in Federal funds have been earmarked to repair and upgrade America’s infrastructure. In addition to roads and bridges, this flood of cash will pour into AI data centers, renewable energy sources and more.
In, you’ll discover 5 surprising stocks positioned to profit the most from the spending spree that’s just getting started in this space.
Download How to Profit from the Trillion-Dollar Infrastructure Boom absolutely free today.Rayonier Advanced Materials Inc. (RYAM) : Free Stock Analysis Report
Research Solutions Inc. (RSSS) : Free Stock Analysis Report
Castle Biosciences, Inc. (CSTL) : Free Stock Analysis Report
Private Bancorp of America, Inc. (PBAM) : Free Stock Analysis Report
Talkspace, Inc. (TALK) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
