December was a rough month for stocks, with small caps leading the market in its selloff.
While the S&P 500 did briefly dip into bear market territory in a brutal Christmas Eve crash, the Russell 2000 small-cap benchmark had already entered into a bear market with small caps more than 20% off their previous highs.
But so far in 2019, things are beginning to perk up again for small caps and these three are the stocks I’ve got my eye on now.
Zuora (NYSE: ZUO)
Last month, Needham analyst Scott Berg raised his price target for Zuora (NYSE: ZUO) stock to $27—35.47% higher than current prices—and boosted the stock from a Buy to a Strong Buy, saying the stock is his pick for 2019 in the software-as-a-service (SaaS) space.
“We believe Zuora to be the proverbial baby in the bath water, as its fast yet sustainable secular greenfield growth is getting thrown out with short-term, high replacement cycle growth,” Berg wrote in a note to clients.
Zuora dominates in a rather niche, but important, space. The company’s platform helps other companies pivot to a subscription model by providing a suite of products that tackle the complicated accounting that comes with subscription-based businesses. And once on the platform, these companies come to rely heavily on Zuora’s suite of products, and thus clients are loyal and recurring revenues are strong.
The company currently has a market cap of just $2 billion, and as it provides the building blocks for the burgeoning subscription economy, Zuora is likely to have upside over the long term.
The average analyst price target for ZUO is $26.40, suggesting possible upside of nearly 33% over the next twelve months.
Weight Watchers (NYSE: WTW)
Shares of Weight Watchers (NYSE: WTW) were down -23% last month over fears that Oprah Winfrey would be playing a smaller roll as spokesperson, and as subscriber growth was slowing.
The company announced an additional spokesperson in actress Kate Hudson, and released a new ad campaign with both Winfrey and Hudson, but that did little to quell investors’ anxiety in the first few trading days in the new year.
However, healthy eating and fitness trends are more prevalent today than ever before, thanks partly to the rise of social media apps like Instagram and Snapchat (NYSE: SNAP).
As people share photos on these apps, they want to look good those photos. To look good, they turn to healthier eating and more active lifestyles, and they look to their favorite celebrities for inspiration. Enter Weight Watchers, and its healthy eating program and inspirational spokespeople, Oprah and Kate Hudson, ready to empower a new generation of customers eager to lose weight.
This healthy lifestyle trend isn’t going anywhere anytime soon as personal health tops the list of resolutions for 2019. It’s expected that the weight management market in the U.S. alone could reach more than $250 billion by 2024. Right now, Weight Watchers is only a $3 billion company, but as it’s at the center of the expanding weight loss market, this company could grow by leaps and bounds.
WTW has a consensus Buy rating and the average analyst price target for the stock is $91.91, indicating possible upside of 162% over the next twelve months.
Stitch Fix (NASDAQ: SFIX)
Stitch Fix (NASDAQ: SFIX) is pioneering the future of data-driven, personalized shopping.
Data is transforming the world as we know it. Think Amazon (NASDAQ: AMZN) with its data-driven platform that has upended traditional retail. Or Netflix (NASDAQ: NFLX), the streaming giant that’s revolutionizing the media and entertainment spaces.
Stitch Fix is doing the same thing as it uses digital data for personalized and curated online shopping. The personalized shopping space is sure to see growth over the next several years as it is lower cost, less time intensive, and is less of a hassle than traditional shopping. And as the personalized e-retail model gains steam in the years to come, Stitch Fix is likely to grow right along with it.
Right now, Stitch Fix is a small company at a market cap of just $2 billion. But it’s carving out a new space in the $1.7 trillion global apparel market, and has plenty of room to grow.
Analysts’ average price target for SFIX is $29.89, suggesting possible upside of 46.59% over the next twelve months. Last month, KeyCorp gave the stock an Overweight rating and set its price target at $38 – 83.4% higher than Thursday’s closing price.