Buying small-cap stocks could be prudent given they are trading at low valuations compared to buying shares of large-cap S&P 500 companies. These stocks can be considered a high-risk/high-reward play.
ChargePoint Holdings (NYSE: CHPT)
ChargePoint is an electric vehicle (EV) charging solutions provider. The company sells hardware connected through cloud services, as well as parts, labor and warranty to customers. The company has over 240,000 charging spots and holds over 70% market share.
With the increase in EV sales, ChargePoint is likely to be one of the winners.
In its Q2 earnings release for FY2024, ChargePoint reported a $150 million revenue, up 39% year-over-year from $10.8 million. Third-quarter revenue guidance is similar at $150 to $165 million.
During the release, the company also announced a reduction of 10% of its global workforce, which should result in annual operating expense savings of around $30 million.
Morningstar’s quantitative equity report gives CHPT a fair value of $11, which is 91% above the current price of $5.75.
Lucid Group (NASDAQ: LCID)
Because the company faced supply chain issues and lower demand, its stock price has been beaten since the November 2021 peak. No wonder the stock is heavily shorted, currently standing at 37% of the float.
The company still has an operating loss, meaning it costs Lucid more to produce a car than the profit it earns from selling it. Management is constantly making attempts to lower costs, even by laying off 18% of its workforce in March.
That said, Morningstar’s analyst equity report gives a 58% higher fair value of $9.30 per share, than LCID’s market price of $5.86.
Immersion Corp (NASDAQ: IMMR)
Immersion Corp is a licensing company for the invention, acceleration and scaling of haptic technologies. Its main focus is on the mobility, gaming and automotive markets, including virtual and augmented reality and wearables.
Haptic technology is what allows users to ‘feel’ the tech they interface with either via vibration or motion. For example, a joystick vibration or pressing a button in a car that has integrated this tech.
Most of the company revenue is from royalties and licenses. This means Immersion Corp isn’t concerned about producing, marketing and packaging its tech.
The company has also been involved in several lawsuits against large companies, such as Microsoft, Sony and Apple for supposedly using its tech. Sony paid $150 million while Apple and Microsoft paid undisclosed amounts in these disputes from 2002 to 2018.
Immersion has been given a fair value of $9.43 by Morningstar’s analyst equity report. That’s 38% above the current market price of $6.81.
S&P 500’s 17% return year-to-date has outperformed all three stocks. IMMR stock is down 10%, Lucid is down 5% and ChargePoint is down 36% during the same period.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.