Tech stocks may once again lead the overall market in coming months as the negative impact of high interest rates finally subsides. Small-cap tech stocks can be risky, volatile investments given the unpredictability of new technologies. In addition, many small-cap tech companies compete with larger, more established companies that can outspend them.
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Large-cap tech names get most of the attention on Wall Street, but their small-cap counterparts may be better buys for risk-tolerant investors seeking larger returns. Here are seven of Bank of America’s top tech stock picks for 2024 with market capitalizations of $2 billion or less:
| Stock | Implied upside over Sept. 6 close |
| MeridianLink Inc. (ticker: MLNK) | 10.7% |
| PagerDuty Inc. (PD) | 29.4% |
| Amplitude Inc. (AMPL) | 63.2% |
| CompoSecure Inc. (CMPO) | -15.2% |
| Weave Communications Inc. (WEAV) | -3.4% |
| VNET Group Inc. (VNET) | 18.3% |
| 8×8 Inc. (EGHT) | 141.5% |
MeridianLink Inc. (MLNK)
MeridianLink provides loan and mortgage origination software for lenders. The company has roughly 2,000 customers, generated $304 million in fiscal 2023 revenue and is among the top 50 companies in the IDC Global FinTech rankings. In the second quarter, the company reported 4% revenue growth and 11% year-over-year lending software solutions revenue growth. Analyst Koji Ikeda says MeridianLink is well positioned to gain share in a nearly $8 billion total addressable market. Ikeda says MeridianLink facilitates the digital transformation of users’ businesses and the optimization of customer engagement. Bank of America has a “buy” rating and $25 price target for MLNK stock, which closed at $22.58 on Sept. 6.
PagerDuty Inc. (PD)
PagerDuty is an incident response management platform vendor that helps information technology professionals respond to major incidents quickly, reducing downtime and improving customer outcomes. Ikeda says PagerDuty’s 10% annual recurring revenue growth and 106% net revenue retention in its enterprise business segment in the most recent quarter highlight the company’s enterprise strength. However, he says challenges in the company’s small and medium business segment have weighed on overall growth numbers. Nevertheless, Ikeda says the stock offers investors an attractive risk/reward profile given its growth potential. Bank of America has a “buy” rating and $23 price target for PD stock, which closed at $17.78 on Sept. 6.
Amplitude Inc. (AMPL)
Amplitude is a digital analytics platform that helps companies maximize the value of their products. The company helps customers collect critical data and use that data to generate valuable insights about their own customers’ behavior, allowing them to produce better, growth-driving products and services. Ikeda says investors don’t fully appreciate Amplitude’s opportunity to gain market share in digital optimization. As more companies digitally transform their businesses, Ikeda says the volume of digital products introduced will continue to grow and support healthy demand for Amplitude. Bank of America has a “buy” rating and $14 price target for AMPL stock, which closed at $8.58 on Sept. 6.
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CompoSecure Inc. (CMPO)
CompoSecure designs and produces premium metal payment cards and provides professional services to top U.S. card issuers and other global customers. The company’s patented card technology is intended to improve affluent credit card users’ experiences and increase customer retention and spending. Analyst Cassie Chan says CompoSecure has a dominant market share, which will allow the company to take advantage of “premiumization” and spending trends among so-called mass affluent consumers. Premiumization is a strategy in which brands increase the perceived value of offerings to justify higher prices. Bank of America has a “buy” rating and $10 price target for CMPO stock, which closed at $11.79 on Sept. 6.
Weave Communications Inc. (WEAV)
Weave operates a customer communications and engagement software platform aimed at helping small- and medium-sized businesses monetize their customer interactions and reduce the time and effort devoted to mundane tasks. Analyst Michael Funk says Weave is attractively valued relative to other software vendors. Funk says Weave has less than 0.5% penetration in its specialty medical market, its fastest-growing vertical. He says specialty medical should continue to contribute positively to overall growth through at least 2025. In addition, Funk says Weave has consistently expanded gross margins. Bank of America has a “buy” rating and $10 price target for WEAV stock, which closed at $10.35 on Sept. 6.
VNET Group Inc. (VNET)
VNET is a leading carrier-neutral internet and data center services provider in China. Analyst Daley Li says VNET has eased its liquidity pressures through at least fiscal 2026 and it has reported improving order visibility and long-term demand. The company is generating demand from short video customers and has opportunities in artificial intelligence model training. Li says the company’s largest shareholder, Shandong Hi-Speed Holdings, provides VNET access to new business opportunities, renewable energy and computing projects, and cheap debt financing. Bank of America has a “buy” rating and $3.30 price target for VNET stock, which closed at $2.79 on Sept. 6.
8×8 Inc. (EGHT)
8×8 provides voice, chat, video, contact center and enterprise application programmable interface (API) software-as-a-service solutions to enterprise customers, government agencies and other organizations. Funk says 8×8 is a market leader in both unified communications as a service (UCaaS) and contact center as a service (CCaaS). He’s bullish on the company’s potential to bundle both services across its core customer base and expand its enterprise market share over time. Funk says 8×8 has also demonstrated its ability to move upmarket and land larger enterprise customers. Bank of America has a “buy” rating and $4.25 price target for EGHT stock, which closed at $1.76 on Sept. 6.
[SEE: 7 Best Monthly Dividend Stocks to Buy Now.]
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7 Best Small-Cap Tech Stocks to Buy originally appeared on usnews.com
Update 09/09/24: This story was previously published at an earlier date and has been updated with new information.
