In 2024, the investment landscape has shifted significantly from its previous year’s focus on large-cap stocks, drawing attention towards the burgeoning potential of small-cap companies.
This change is exemplified by the impressive performance of the Russell 2000 index, which saw an 8% increase since February 1, outpacing its large-cap counterparts.
Are Large-Cap Stocks Overvalued?
This pivot is attributed to several factors, including the overvaluation of large-cap stocks and a growing investor confidence in the economic prospects of smaller firms amid a climate of sustained growth.
Among the small-cap universe, two companies stand out for their remarkable growth potential and strategic business moves: Turtle Beach and SkyWater Technology.
Gaming Company Turtle Beach Draws Intrigue
Turtle Beach (NASDAQ: HEAR), renowned for its gaming headsets, along with a variety of other gaming peripherals, has seen its stock soar by over 70% to $17.60 per share as of April 4, with analysts projecting a target of $24 per share.
This optimism is not unfounded; Turtle Beach’s recent financials reveal a substantial profit of $8.6 million in the fourth quarter, a significant turnaround from the previous year’s $23 million net loss. This recovery was aided by a strategic reduction in expenses by 17%, despite a slight dip in revenue.
The company’s ambitious trajectory is further bolstered by its acquisition of Performance Designed Products (PDP), a specialist in gaming controllers.
This move not only diversifies Turtle Beach’s product line but also promises considerable financial synergy, with projected cost savings between $10 million to $12 million and a forecasted revenue surge to $370 million-$380 million in fiscal 2024.
The acquisition positions Turtle Beach for transformative growth, leveraging a forward price-to-earnings ratio of 24 to signal robust future performance.
Semiconductor Company on The Rise
SkyWater Technology (NASDAQ: SKYT) differentiates itself as a semiconductor foundry through its unique “technology-as-a-service” (TaaS) model, catering to sectors like aerospace, healthcare, and automotive without directly competing with industry giants like Taiwan Semiconductor.
SkyWater’s distinction is further emphasized by its role as a trusted supplier for the U.S. Department of Defense, underscored by a $190 million award from the DoD.
With a record revenue of $287 million in the last fiscal year, marking a 35% increase, SkyWater is on a positive trajectory despite a net loss of $31 million. The company’s growth is driven by its Advanced Technology Services (ATS) segment, which benefits from expanding governmental contracts, constituting 79% of its total revenue.
Anticipated to grow by 10% to 20% in 2024, ATS positions SkyWater at the forefront of semiconductor innovation.
The potential federal funding through the CHIPS and Science Act for SkyWater’s facility upgrades underscores the company’s strategic position within the semiconductor industry.
With a year-to-date stock price increase of 16% to $10.40 per share and an analyst consensus target of $15 per share, SkyWater is poised for continued investor interest.
Investment Opportunities Within The Small-Cap Market
The contrast between Turtle Beach’s consumer-facing gaming technology and SkyWater’s foundational semiconductor manufacturing highlights the diverse investment opportunities within the small-cap market.
Both companies exemplify strategic adaptability and growth potential in their respective fields, offering compelling narratives for investors navigating the evolving landscape of 2024.
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I’m Nathan Goldstein, a writer and political analyst focused on simplifying complex social and political issues. My writing breaks down the intricacies of today’s society and politics to make them more understandable for you. I’m committed to providing clear and well-informed insights.
