The surge in long-term treasury yields above 4.75% at the start of the quarter signals optimism about the economy. It also has positive implications for microcap stocks. When treasury yields rise, it often reflects investor confidence in economic growth. Furthermore, this prompts a shift of capital from safer assets like bonds to riskier investments such as equities. Microcap stocks, known for their growth potential, stand to benefit as investors seek better returns in this environment. Higher yields make microcaps relatively more attractive compared to fixed-income options. This enhances their appeal. Thus, these three sleeper stocks are the ones set to explode in growth as we head into 2024.
Salesforce Incorporated (CRM)
Salesforce Incorporated (NYSE:CRM) is a cloud-based software company that provides management software and customer-related services. It covers a diverse range of services, from managing leads to automation of sales and marketing processes. CRM is up by 50% YTD and is valued at $202.78 per share.
FY24 Q2 earnings indicate strong surges. Revenue for Q2 reported an 11% YoY increase to $8.60 billion and FY24 revenue guidance was raised to $34.7 billion. The company also forecasts a higher cash flow growth for FY24 to 23% YoY. From operations, CRM generated $0.81 billion, or an increase of 142% YoY and an FCF growth of 379% YoY.
WSJ analysts give CRM 33 ‘buy’ ratings as of this month and predict a median price target of $260, ranging from $159 to $340. Salesforce presents a long-term projection of $380 per share by the end of 2028.
The market for cloud computing is expected to grow at a CAGR of 16.40% from 2023 to 2028, a jump from $0.58 trillion to $1.25 trillion. The global demand for this market is growing exponentially due to rising sectors such as AI and machine learning. Businesses in the new digital age want to incorporate this new tech, and cloud computing enables them to do so.
Salesforce’s commitment to embracing the latest advancements in AI technology positions the company favorably for sustainable growth in the long run. With major AI innovations, CRM is one of the top sleeper stocks on this list.
Enphase Energy Incorporated (ENPH)
Enphase Energy Incorporated (NASDAQ:ENPH) is an energy company that specializes in manufacturing solar micro-inverters, battery energy storage, and EV charging stations for residential customers.
ENPH stock is currently valued at $120.15 and down 52.57% YTD. This decline is due to the solar industry experiencing setbacks due to the short-term interest rate hikes.
Despite its stock tanking, Enphase has seen a revenue growth of 61.11% YoY and diluted EPS growth of 176.84% YoY. Yahoo! Finance has 32 analysts with price targets ranging from a low of $114.00 to a high of $335.95 and an average target of $194.97. The current recommendation rating for ENPH stock is a buy.
The global solar market is projected to grow at a 6.9% CAGR to $373.84 billion by 2029. Countries such as China, the United Kingdom, and Germany seeking to incorporate more renewable energy into their energy outputs, serving as a driving factor for industry growth rate.
ENPH shows strong potential in the coming years as the global demand for clean energy such as solar energy increases. With steady financials and continued expansion of its residential and commercial customer base, investors must purchase ENPH before the boom. When it comes to sleeper stocks, ENPH is one of the most slept on stocks out there.
Arlo Technologies (ARLO)
Arlo Technologies (NYSE:ARLO) combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices, most well known for making wireless surveillance cameras. Furthermore, ARLO stock is up 181.43% YTD.
Arlo reported excellent financials during this quarter. Furthermore, the company’s Q2 earnings highlight the payoff of an important business model shift. In 2022, Arlo switched to a service-based business model as opposed to a hardware one. This service business is now paying off tremendously, with 55% YoY growth in paid accounts, 54% growth in service revenue, and 66% growth in annual recurring revenue. Most importantly, the company has reached a record service gross margin of 75%.
Yahoo! Finance reports 4 analysts predicting upside with a mean 1-year price target of $14.75, with a range from $11.00 to $17.00. Firms have unanimously rated ARLO as a buy and ⅘ analysts have given the company a buy rating.
In spite of already making a huge comeback, Arlo’s financials have proved that the benefits from its shift in business model have not even reached its peak yet. Furthermore, the projected 10.56% CAGR in the home security market makes Arlo one of our sleeper stocks you do not want to miss.
On the date of publication, Michael Que 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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.