Unlike in 2023, when large-cap stocks dominated, the markets have broadened a bit in 2024. This has been particularly true over the past month or so, since the small-cap Russell 2000 has jumped about 8% since Feb. 1, outperforming large caps by a slight margin since then.

There may be several the rationale why this has occurred and might likely proceed inside the near term. One reason is that many large caps have grow to be overvalued, leading investors to look elsewhere. One other is that a period of sustained economic growth with the potential for improving conditions has instilled more confidence in investors within the expansion prospects of smaller corporations.

Listed below are two top small-cap stocks that investors will want to contemplate.

1. Turtle Beach

Turtle Beach (NASDAQ:HEAR) is best known for its gaming headsets, nevertheless it also makes other gaming accessories, like microphones, mice, keyboards and other devices. The stock has been on a tear this 12 months, up greater than 70% 12 months so far as of April 4 to realize $17.60 per share — with more room to run. The consensus price goal amongst analysts is $24 per share, which may very well be one other 36% increase over its current price.

Turtle Beach generated a profit of $8.6 million inside the fourth quarter, or 47 cents per share, up from a $23 million net loss within the an identical quarter a 12 months ago. While the company’s revenue was down barely, its earnings were boosted by a 17% year-over-year cut in expenses. Nevertheless, the large catalyst for Turtle Beach going forward is its acquisition of a key rival: Performance Designed Products, or PDP.

As PDP focuses on gaming controllers, the acquisition will expand Turtle Beach right into a contemporary market. With PDP inside the fold, Turtle Beach expects $10 million to $12 million in cost synergies and revenue of $370 million to $380 million in fiscal 2024, with adjusted EBITDA of $51 million to $54 million. The combined company’s revenue is anticipated to be some 43% higher than fiscal 2023, while its adjusted EBITDA should skyrocket greater than 700% from just $6.5 million in fiscal 2023. Importantly, all these numbers include just nine months with the PDP addition.

Turtle Beach calls this a transformational acquisition, and that may very well be the case. With a forward price-to-earnings ratio of just 24, there should be excellent growth ahead for Turtle Beach.

2. SkyWater Technology

SkyWater Technology (NASDAQ:SKYT) is a semiconductor foundry, which suggests it makes semiconductors for other corporations and organizations. It offers what it calls a technology-as-a-service (TaaS) model, working with corporations inside the aerospace and defense, healthcare, automotive, industrial, and consumer sectors to construct their very own chips. Nevertheless, SkyWater doesn’t try to compete with the large foundries like Taiwan Semiconductor (NYSE:TSM); fairly, it really works with smaller corporations and start-ups.

Considered certainly one of its biggest customers is the federal government, since it is Defense Microelectronics Activity (DMEA)-certified by the U.S. Department of Defense as a trusted supplier. Throughout the fourth quarter, SkyWater received a $190 million award from the DoD. The company is now coming off a 12 months through which it reported record revenue of $287 million, a 35% increase over the previous 12 months. SkyWater posted a net lack of $31 million, or 68 cents per share last 12 months, with an adjusted EBITDA of $37.2 million.

Looking ahead, the company sees its TaaS model, specifically, its Advanced Technology Services (ATS) business, as its growth driver. Throughout the ATS business, SkyWater works with customers and clients to co-create revolutionary semiconductor solutions that fit their needs. Plenty of the ATS growth has been driven by its expanding relationship with the federal government and DoD. Last 12 months, the ATS business accounted for about 79% of its total revenue, and in 2024, SkyWater expects ATS development revenue to grow by 10% to twenty%.

Earlier this 12 months, the company applied for funding through the federal CHIPS and Science Act to modernize and upgrade its equipment and expand production at its manufacturing facility in Minnesota, where it collaborates with the DOD on semiconductor projects. If SkyWater is awarded funding, which it likely could be, then that might provide an additional boost for the company.

SkyWater stock is up by about 16% 12 months so far, trading at around $10.40 per share. Analysts set a consensus price goal of $15 per share, which may very well be a 43% increase over the share price now. Given its unique area of interest and the growing demand for semiconductor technology, SkyWater should proceed to generate returns for investors.

Disclaimer: All investments involve risk. By no means should this text be taken as investment advice or constitute responsibility for investment gains or losses. The knowledge on this report shouldn’t be relied upon for investment decisions. All investors must conduct their very own due diligence and seek the recommendation of their very own investment advisors in making trading decisions.