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Small-cap stocks are often favored by investors for their significant upside potential, especially in emerging sectors. Amid growing rate-cut optimism, investors last week piled into small-cap stocks, which have generally lagged their large-cap counterparts during the Fed's “higher for longer” campaign. Unlike larger companies, small caps often struggle with securing affordable financing, which can hinder growth. However, lower interest rates could provide these companies with the boost they need, creating substantial opportunities for growth in the future.

Additionally, small-cap stocks tend to outperform during periods of economic recovery, making now an ideal time to consider adding them to your portfolio. Furthermore, many small caps are innovation leaders, focusing on disruptive technologies and niche markets that offer high growth potential.

So far this year, the Russell 2000 Index (RUT) has notched just a 7% increase, compared to gains of 17.7% for the S&P 500 Index ($SPX) and 20.8% for the Nasdaq-100 Index ($IUXX). This underperformance is one reason why analyst Tom Lee, head of research at Fundstrat, argues that small-cap stocks offer the “most compelling near-term investment case” in a new research note.

Today, we spotlight one small-cap stock that has received bullish coverage from analysts due to its innovative approach, impressive growth metrics, and creative strategies that position it for substantial future gains.

Founded in 2019, Jasper Therapeutics (JSPR) is a specialized biotech company focused on advancing healthcare through innovative solutions in genetic engineering and molecular biology. With a vision to revolutionize the biotech industry, Jasper leverages cutting-edge technology and scientific expertise to develop groundbreaking therapies and diagnostic tools. A component of the Russell 2000 Index, the company commands a modest market cap of $287 million.

JSPR Stock Performance

The story of Jasper's stock begins with outsized gains in 2021, during the COVID period when many biotech companies were in a race to develop vaccines and experienced maximum gains at that period. Jasper was no exception; its stock soared from $99 to $164, reaching its peak in October 2021. However, the stock then experienced a significant correction, and JSPR shares are now down about 90% from their 2021 highs.

To maintain compliance with Nasdaq listing standards, the company decided to execute a reverse stock split. In December 2023, Jasper stakeholders approved the split, granting authority to the board of directors to select a ratio. They settled on a 1-to-10 stock split ratio, and the reverse split went into effect in early January.

So far this year, JSPR has performed well, up 142% on a YTD basis to trade around $19 - and analysts have high hopes for the stock to keep rising.

Jasper Reports Q1 Updates

On May 14, the pre-revenue company reported its first-quarter results, with losses coming in narrower than expected. Jasper reported a quarterly loss of $13.7 million, or $1.03 per share, a 17% improvement from the prior quarter. The company's total assets grew to $125.9 million, an excellent 32.7% increase.

Jasper reported cash and cash equivalents totaling $118.5 million. During the same period, research and development expenses amounted to $10.3 million, which included $0.3 million in stock-based compensation expenses. Through smart strategies and biotech innovation, the firm successfully reduced its operating cash flow loss from $52 million to $15.7 million, highlighting its adeptness in overcoming financial hurdles and positioning for sustainable growth.

Along with the Q1 report, JASPR said it completed an offering of 3.9 million shares of its common stock at $12.95 per share. This generated gross proceeds of approximately $50 million, which the biotech says will extend its cash runway through Q3 of 2025.

The company intends to use the net proceeds for the continued advancement of its preclinical and clinical development programs, specifically focusing on briquilimab in mast-cell-driven diseases such as chronic spontaneous urticaria (CSU) and Chronic Inducible Urticaria (CIndU), as well as for general corporate purposes.

Earlier this year, the company obtained authorization from the European Medicines Agency (EMA) for its Phase 1b/2a SPOTLIGHT study. This study evaluates single doses of subcutaneous briquilimab in adult patients diagnosed with chronic inducible urticaria (CIndU). Patient enrollment began in early 2024, with initial data anticipated in the second half of this year.

What Do Analysts Expect for Jasper Stock?

Analysts are quite bullish on the prospects for Jasper stock. Earlier this year, RBC Capital noted that clinical updates expected for briquilimab during the third quarter could act as positive catalysts for the small-cap biotech, suggesting that now could be an opportune time to pick up shares.

Overall, Wall Street analysts have given JSPR a consensus rating of "strong buy." Out of 10 analysts in coverage, 9 assign a "strong buy" rating, up from 6 “strong buys” a few months ago. The one remaining analyst calls JSPR stock a “moderate buy.”

This bullish group has set the mean price target for JASPR stock at $73, indicating expected upside potential of 276% from current prices - making this biotech stock a potential multibagger return opportunity for investors.

On the date of publication, Nauman Khan 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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.