While mega-cap stocks often capture the spotlight, certain small-cap tech companies are demonstrating significant growth potential. Investors with patience and an appetite for risk might find substantial opportunities in these emerging innovators. Here we explore two small-cap tech stocks that analysts believe are poised for considerable growth.
Harmonic Inc.: Advancing Video Delivery and Streaming Solutions
Harmonic Inc. (HLIT) has established itself as a key player in the video delivery and streaming industry. The company provides cutting-edge infrastructure solutions to broadcasters, cable operators, satellite companies, and telecommunications firms.
Operating through two main segments, Harmonic offers video processing and distribution solutions—including cloud-based services and software—in its Video segment. The Cable Access segment focuses on solutions that enable cable operators to deliver high-speed broadband services.
Despite a 5.8% year-to-date decline in its stock price, bringing its market capitalization to approximately $1.4 billion, Harmonic has demonstrated consistent revenue growth driven by increasing demand for video streaming and broadband services.
In the first quarter, total revenue decreased by 22.5%. However, the company reported a substantial backlog and deferred revenue of $677.8 million. While Harmonic reported a break-even quarter—neither profit nor loss—this compares to a profit of $0.12 per share in the same quarter of the previous year.
Management anticipates that the significant backlog and deferred revenue, coupled with restructuring efforts in the Video segment, will contribute to long-term growth and profitability. For the full year, the company expects net income between $0.51 to $0.71 per share and revenue growth ranging from 6% to 14% over 2023.
Analysts forecast revenue and earnings to increase by 8.0% and 68.2%, respectively, in 2024, with further growth of 22.3% in revenue and 59% in earnings expected in 2025. The growing demand for video streaming services and the rollout of 5G networks are likely to drive this growth.
Currently trading at 19 times forward earnings, Harmonic presents an attractive growth opportunity.
Analyst Ratings for Harmonic Stock
Wall Street analysts maintain a positive outlook on Harmonic, with an average rating of “strong buy.” Based on a mean target price of $16, the stock has an upside potential of 30.3% from current levels. The high target price of $18 suggests a potential upside of 46.6% over the next 12 months.
| Analyst Ratings for HLIT |
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| Out of six analysts, five rate it as “strong buy” and one as “moderate buy.” |
Enovix Corp: Innovating Advanced Battery Technology
Enovix Corp (ENVX) is a technology company specializing in the development of advanced lithium-ion batteries. Catering to sectors like consumer electronics, electric vehicles, and the Internet of Things (IoT), Enovix focuses on creating high-performance, next-generation battery solutions.
With a market capitalization of approximately $2.7 billion, Enovix stock has gained 24.4% year-to-date, outperforming the broader market.
Enovix batteries are designed to surpass conventional lithium-ion batteries in terms of energy density, safety, and cycle life. In the first quarter, the company reported a remarkable increase in revenue to $5.3 million, up from just $21,000 in the same period last year, primarily due to strong performance in batteries sold to IoT customers.
The adjusted net loss was $0.31 per share. However, management is focused on cost efficiency to expedite the path to profitability.
For the second quarter, Enovix expects revenue between $3 million and $4 million, a significant jump from $42,000 in the prior-year quarter. The company anticipates a loss of $0.22 to $0.28 per share.
Analysts project Enovix’s revenue to increase by 180.7% in 2024 and by 259% in 2025. The company’s Fab2 factory in Malaysia is set to begin battery production this year, with final EX-1M batteries available for sampling in the second quarter. Given the increasing demand for advanced battery technologies, Enovix is well-positioned for substantial growth in the coming years.
Analyst Ratings for Enovix Stock
Analysts have a “strong buy” consensus rating for Enovix, with a mean target price of $21, indicating an upside potential of 34.7% from current levels. The high target price of $36 implies a potential upside of 131% over the next 12 months.
| Analyst Ratings for ENVX |
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| Out of 13 analysts, 12 rate it as “strong buy” and one as “hold.” |
Conclusion
Both Harmonic and Enovix represent compelling opportunities in the small-cap tech sector. Their innovative approaches and growth prospects make them stocks to watch for investors seeking exposure to emerging technology leaders.