Microcap stocks are companies with a market cap of less than $300 million. While investing in these smaller firms carries higher risks, the upside is their potential for substantial growth, making them attractive to investors willing to take on a bit more volatility.
Among the noteworthy microcap stocks worth considering are Crexendo (CXDO) and Bragg Gaming Group (BRAG). Both these companies have earned "Strong Buy" ratings from analysts, reflecting confidence in their long-term growth potential.
What makes these companies particularly appealing is their position in high-growth industries. This strategic advantage and their smaller size give them the flexibility to scale rapidly, offering investors the chance to benefit from potentially significant returns over time. Let’s explore why CXDO and BRAG are two stocks analysts love, with consensus forecasts calling for around 50% upside potential.
Microcap Stock #1: Crexendo
Valued at $115 million, Crexendo (CXDO) is a software technology company that provides cloud communication platforms and unified Communications as a Service (UCaaS). The company is poised to benefit from its growing user base, which recently surpassed 5 million global users. Moreover, its platform is growing rapidly in the UCaaS industry.
The company is investing in its cloud infrastructure, expanding its services, and integrating artificial intelligence (AI) technology in its offerings to grow its market share. Further, the improvement in its pricing and sales mix supports its margins.
Crexendo also benefits from the ongoing shift by small, mid-sized, and large businesses to the cloud. As more companies adopt its solutions, demand for additional services and higher spending per customer are expected to increase. International growth, particularly in Europe, presents additional opportunities. Crexendo’s backlog has grown to $71.16 million as of Q2 2024 — up 39% from Q2 2023 — which indicates strong future growth.
In addition to organic growth, Crexendo is also exploring strategic acquisitions to accelerate its expansion and support its stock price.
Wall Street remains optimistic about Crexendo’s future, as reflected in the unanimous “Strong Buy” rating.
Analysts' average price target for CXDO is $6.67, suggesting a potential 48.2% upside from current levels.
Microcap Stock #2: Bragg Gaming Group
Bragg Gaming Group (BRAG) is a global B2B iGaming technology provider. With its innovative technology and broad content offerings, it is poised to capitalize on the growing online gaming and digital entertainment market.
Bragg stands out due to its diversified business model, which spans the entire iGaming ecosystem. The company produces content and provides turnkey technology solutions, such as its player account management platform, marketing, and engagement tools. This full-suite approach enables the company to optimize the delivery of its exclusive content, which drives its top line.
Between 2019 and 2023, Bragg saw its revenue grow at a CAGR of 37%. This growth reflects an expansion of its customer base in key markets, including North America, Europe, and Latin America. As the global demand for online betting services accelerates, Bragg is positioned to tap into a rapidly growing addressable market.
The company is aggressively scaling its proprietary content, leveraging its in-house studios and partner studios to deliver exclusive games across multiple regulated markets. This content-driven strategy is supported by its efforts to secure the necessary licenses and certifications, ensuring that it can operate in all key jurisdictions worldwide.
Further, Bragg’s expansion into new markets is paying off, with solid distribution gains in regulated regions like the U.S., Europe, and Latin America. A recent partnership with Light & Wonder has expanded its reach in the regulated markets. At the same time, its collaboration with Sisal in Italy has given Bragg a foothold in Europe’s second-largest iGaming market.
Bragg’s leadership projects strong future growth, with expectations to quadruple revenue over the next five years. The company is targeting a 32% CAGR in revenue alongside a healthy expansion of adjusted EBITDA. This growth is supported by investments in its remote gaming server, which enhances the scalability of its platform and ensures that it can distribute both proprietary and third-party games effectively.
The high-margin content from Bragg Studios, combined with contributions from partner studios, is building a steady stream of long-term revenue for the company. As new games are released, existing content continues to generate revenue, creating a sustainable model for future growth.
In addition to organic growth, Bragg is actively exploring strategic opportunities such as mergers, acquisitions, or a potential sale of the business, which could unlock additional value for shareholders.
Wall Street analysts are bullish on BRAG stock, and have a “Strong Buy” consensus rating.
Their average price target of $7.76 suggests a 51.6% upside potential from current levels.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
