While large-cap companies tend to steal the show, leaving their small-cap peers in the shadows. However, these stocks are evolving companies with outstanding growth potential. The Russell 2000 Index (IWM) measures the performance of 2,000 small-cap companies in the U.S. The index is widely used as a benchmark for small-cap stocks, with market capitalizations ranging from $250 million to $2 billion, providing an understanding of the performance of these smaller, growth-oriented companies.
Here are two Russell 200 stocks that have received a “Strong Buy” rating on Wall Street. Let’s find out why.
Russell 2000 Stock #1: Semtech
Founded in 1960, Semtech (SMTC) has been a leading supplier of analog and mixed-signal semiconductor solutions. Its portfolio is diverse, spanning various sectors, including Internet of Things (IoT) systems, cloud connectivity services, and advanced semiconductor solutions. After a tremendous surge of 185.8% last year, SMTC stock is down 41% so far this year, compared to the broader market gain. On Feb. 7, the company announced that its CopperEdge product line would not meet the expected sales growth target for fiscal year 2026 and would fall short of the previously estimated $50 million.
This unexpected revision prompted several law firms to file class-action lawsuits against Semtech, alleging that the company made false and misleading statements about CopperEdge products. This has resulted in a significant decline in Semtech’s stock price this year.
The company’s ability to address the issues with its CopperEdge product line and regain investor confidence will determine its stock's future trajectory. However, the company's financials remain strong, thanks to its crown jewel, LoRa (Long Range) technology, which provides long-range communication capabilities with low power consumption.
In the most recent third quarter of fiscal 2025, net sales increased 17.8% year on year and 10% sequentially. Data center sales, in particular, increased 58% sequentially to $43.1 million, thanks to artificial intelligence (AI)-driven product demand. Adjusted earnings per share (EPS) of $0.26 grew from $0.02 in the year-ago quarter. Both revenue and earnings surpassed consensus estimates. Adjusted gross margin remained strong at 52.4%, up from 51.3% in the same quarter last year. Management believes that AI-driven demand could be a “long-term and transformational growth engine for Semtech.”
Despite recent concerns, Wall Street analysts still rate Semtech stock as a “Strong Buy.” Out of the 13 analysts who cover SMTC stock, 10 have rated it a “Strong Buy,” one says it is a “Moderate Buy” rating, and two suggest a “Hold.” Based on the mean target price of $68.64, Semtech stock has upside potential of 90% from current levels. Plus, the high target price of $85 suggests that the stock could rally as much as 136% over the next 12 months.
Russell 2000 #2: Matador Resources
The second Russell stock on my list is Matador Resources (MTDR), a major player in the oil (CBJ25) and gas (NGJ25) exploration industry. Matador has also gained a reputation among passive income investors as a top dividend stock. It has a forward dividend yield of 2.4%, and recently increased its dividend by 25%, which is encouraging news for dividend investors. This dividend hike shows the company’s confidence in its cash flow generation ability and future earnings potential. In 2024, the company generated $807.3 million in adjusted free cash flow, with FCF expected to reach $1 billion in 2025.
Between 2014 and 2024, earnings have increased at a compounded growth rate of 16.42% over the same period. This stable growth has allowed the company to pay dividends consistently. It has also hiked its dividend six times in the last four years. Valued at $6.5 billion, Matador’s stock has dipped 5.4% year-to-date, compared to the broader market gain.
In 2024, Matador’s move to acquire Ameredev’s assets significantly bolstered its presence in the Delaware Basin. Management stated that it added more than 25,000 barrels of oil and natural gas equivalent (BOE) per day in production. Net income rose 4.6% to $885.3 million in the year. In 2025, Matador expects its average daily BOE production to increase by 20%, reaching 205,000 BOE per day. Furthermore, the company expects yearly oil production to increase by 22% in 2025, with average daily oil production reaching 122,000 barrels per day.
Overall, Wall Street rates Matador stock a “Strong Buy.” Out of the 17 analysts who cover MTDR stock, 14 have given it a “Strong Buy,” while two say it is a “Moderate Buy,” and one suggests a “Hold.” Based on the mean target price of $76.94, Matador stock has upside potential of 44% from current levels. Plus, the high target price of $91 suggests that the stock could rise more than 71% over the next 12 months.
