The last quarter of 2018 was one we’d all like to forget. And while stocks have been on a quiet tear so far this year, there’s still cause for concern.
We’ve already seen negative surprises from Netflix (NASDAQ: NFLX), with its strong subscriber growth but disappointing revenue figures that sent the stock falling today, and before that there was Apple’s (NASDAQ: AAPL) revenue warning that billionaire hedge fund manager Jeffrey Gundlach said is “the kind of stuff that happens in a bear market.”
But while these market leaders are getting all the headlines, there may be some promising opportunities with small caps.
Here are two that analysts say are poised to deliver triple-digit gains over the next twelve months.
The Home Security Camera Pioneer
The stock has struggled since its IPO in August, and shares were crushed last month after the company announced disappointing guidance for the fourth quarter as the company pushed the release of its latest home security system, Arlo Ultra, to this month.
But there’s a long-term opportunity with Arlo that I think gives reason to be excited about the stock. Back in 2014 when it was still under Netgear’s wing, Arlo launched a line of home security cameras. Since then, the company has shipped more than 10 million units and there are currently 2.5 million registered users on its cloud-based monitoring platform, with roughly 74 million videos streamed on the platform daily.
The home security market is stacked with big names like Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOGL, GOOG), but the opportunity is massive. Gartner says the sector should see spending on the connected home to jump from $45 billion in 2017 to $146 billion by 2021. And if Arlo proves to gain market share in the home security camera hardware market and continues to expand its services base, we could see the share price climb much, much higher.
The average analyst price target for ARLO is $27, suggesting possible upside of 242.64% over the next twelve months. Earlier this month, Imperial Capital reiterated its Outperform rating on the stock and set its price target at $29 – 268% higher than Thursday’s closing price.
A Leading Osteoporosis Drug Maker
Radius Health (NASDAQ: RDUS) is a commercial-stage biotech with a leading and highly effective osteoporosis drug, Tymlos.
With the healthcare sector, small caps have been hit the hardest recently as the broader market has struggled. But unlike some of the research-stage biotechs that require capital and are more volatile, commercial-stage biotechs like Radius have considerable cash balances and exciting growth prospects.
Radius ended last year with $235 million in cash in the bank. In its Q3 report in November, the company reported a jump in revenue of 22% to $27.6 million thanks to strong sales growth with Tymlos. For 2018, U.S. revenue for the drug is expected to come in between $95 million and $98 million. But for 2019, Tymlos’ U.S. revenue is expected to climb to between $155 million and $175 million, with year-end cash and cash equivalents anticipated to exceed $100 million.
In addition to its Tymlos osteoporosis treatment, which should continue to grow at a breakneck pace as populations age around the world, Radius also has other treatments in the pipeline, including a treatment for male osteoporosis and breast cancer.
The average analyst price target for RDUS is $48.14, suggesting potential upside of 184% over the next twelve months. Late last year, JPMorgan set their price target for the stock at $52 – 206.8% higher than the current price.