Tech startups have been trading erratically since the start of the pandemic, experiencing wild volatility in both directions over the past three years. However, a general trend among these stocks is that sentiment on Wall Street remains quite bearish. Smaller tech stocks have not seen nearly the appreciation of their larger counterparts, signaling that investors are still generally playing it safe. However, this will likely change as the macroeconomic backdrop inflects. Investors should pounce on high-potential stocks whenever they become available at a discount, at least that’s been my prevailing view.
If a business has minimal bankruptcy and dilution risk alongside substantive growth prospects, profits are highly likely if you continually hold shares over a multi-year period. Of course, you could up the ante by buying into more speculative, faster-expanding names. Such stocks can morph into big gainers over time. However, these stocks obviously carry more risk. If the stars align, however, these stocks can certainly catalyze tremendous gains over the long haul if they grow as anticipated. Let’s look at three such tiny tech stocks I think are worth buying right now.
Weave Communications (WEAV)
Weave Communications (NYSE:WEAV) provides an all-in-one platform enabling small businesses to connect with customers seamlessly. This stock presents an intriguing opportunity after crashing from its $20 peak in late-2021 to less than $10 per share at the time of writing. While it did endure a setback over the summer, WEAV stock is once again trending upwards in early 2023.
Weave recently posted impressive Q3 results, handily beating earnings per share estimates by 5 cents and revenue expectations by $1.2 million. The company’s earnings pers hare loss narrowed to just $0.01, an 81% surprise versus projections. Additionally, the company’s free cash flow swung to a positive $8.7 million. That’s a substantial shift, given the $74 million outflow seen last year. Of course, profitability remains questionable, with losses still totaling $7.15 million last quarter. However, that metric has trended in the right direction (lower), from losses exceeding $100 million in 2021 and 2022.
According to most analysts’ estimates, true profits will likely roll in around 2025. However, top-line growth has persisted at a brisk pace, at more than 19% this year. Analysts expect revenue to continue to climb at a 15% annual pace moving forward. In my opinion, these revenue and earnings beats position Weave well for potentially realizing amplified returns over the coming years. SaaS firms often garner steep premiums, making this name seem like a relative bargain at its current multiple.
Terran Orbital (LLAP)
Terran Orbital (NYSE:LLAP) is one of the tiny tech stocks on this list that has been weighted down by heavy dilution in the past. That said, I think LLAP stock is nearing a trough.
Terran holds an enormous $2.6 billion order backlog that dwarfs its $161 million market capitalization. Now, profitability remains questionable in the near term, though analysts forecast the company’s earnings per share to reach positive territory by 2025. With a forward price-earnings ratio (based on 2025 earnings) sitting at just 6-times, this stock certainly appears to be dirt-cheap compared to its space peers, many of whom lack profit visibility and are trading at nosebleed valuations.
In my view, Terran Orbital seems undeserving of its depressed multiple. If even the company is able to provide modest margins on its existing contracted awards, significant value appreciation can occur from sub-$1 per share levels. Of course, risks associated with further dilution and cash burn linger as operational uncertainties, but the company’s underlying revenue growth and total addressable market in space technology provide the catalysts that investors should be focusing on.
Amtech Systems (ASYS)
Amtech Systems (NASDAQ:ASYS) supplies semiconductor manufacturers who service various end markets. This market positioning has provided sizable top-line growth in recent quarters, and is sustainable, in my view. In fact, revenue expanded 54% year-over-year this past quarter to $31 million. That’s the kind of growth investors in this micro-cap stocks want to see.
Meanwhile, Amtech’s net income came in at $12.1 million, representing over a third of sales and a 37.5% year-over-year improvement. With semiconductors maintaining a strong multi-year uptrend, ASYS stock retains substantial room for additional upside.
Given Amtech’s diversified customer base, intensifying semiconductor demand seems poised to fuel this stock over the medium- to long-term. Indeed, ASYS stock has historically followed an unpredictable and volatile trajectory, and shares appear oversold at current depths from my perspective. Accordingly, some caution and a stomach for volatility is required to own this name.
That said, Wall Street’s revenue outlook for Amtech remains upbeat, with healthy growth expected for some time. Now, analysts do expect the company’s earnings per share to decline significantly this year, before recovering to $0.37 in 2024. This means more volatility is likely ahead.
But at a forward price-earnings ratio of only 21-times on a forward basis, this is a stock worth owning given the cyclical exposure it provides.
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On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
