Our list of the best small-cap technology stocks for 2015 is based on a few industry trends: the growth of enterprise spending on cloud technology; the ubiquity of mobile devices; and the growing use of robotics in industry and consumer applications.
Sphere 3D Corp. (NASDAQ/ANY)
Sphere 3D Corp., with a market capitalization of $88.0 million, helps firms move their business applications into the cloud, making the software available across devices. Sphere 3D enables the virtualization and movement of technology into the cloud, including complex applications, desktops, and data.
The company has only one year of financial history and reported a net loss of $13.0 million, or $0.53 per share. However, better news came on April 23, 2015 when Sphere 3D announced it was in collaboration with Microsoft Corporation (NASDAQ/MSFT).
Sphere will have the opportunity to showcase its cloud-enabling solutions during a global road show. The events will be hosted at Microsoft Technology Centers with an audience of Microsoft and Sphere 3D technology resellers. The possibility of a major sales increase sent the stock soaring nearly 30% higher. Moreover, Sphere 3D still trades 60% below its peak share price—leaving the stock plenty of room to run. (Source: Sphere 3D Investor Relations, April 23, 2015.)
Rovi Corporation (NASDAQ/ROVI)
Out of Santa Clara, California, Rovi Corporation, with a total market cap of $1.8 billion, enables clients like Apple and Dish Network to deliver digital entertainment.
Rovi technology is behind on-screen TV guides and many interactive media guides on tablets and smartphones. The firm provides metadata and software that allows cable and satellite companies to deliver video-on-demand services and other media content over the Internet.
To date, financials haven’t been great. Since 2008, Rovi has reported negative net income available to common shareholders. Nevertheless, the net loss decreased by 60% in 2014, and the firm maintains $155 million in cash and cash equivalents. (Source: Rovi Corp 10K, February 19, 2015.)
Analysts also expect earnings for the full year of 2015 to come in at $1.75 per share, up from negative $0.76 per share in 2014—a big move that small-cap technology investors will want to keep their eye on. (Source: Yahoo Finance, last accessed April 24, 2015.)
Advanced Micro Devices, Inc. (NASDAQ/AMD)
Five years ago, Advanced Micro Devices, Inc. was worth about $9.76 per share. Now the price declined to $2.33 apiece and the market cap is a mere $1.8 billion. Even though AMD produces all types of microprocessors, its faith has been closely connected to the personal computer—the sales of which have been replaced by mobile devices.
AMD makes innovative microprocessors, such as those that integrate a graphics card into one unit. They will continue to face an uphill climb against the dominant incumbent, Intel.
Let’s keep an eye on AMD in 2015, as it continues to reduce its operating costs, diversify its product lineup, and reposition itself to compete in a maturing PC market. Profitability may be closer than analysts expect.
iRobot Corporation (NASDAQ/IRBT)
iRobot Corporation maintains a market cap of $1.0 billion, earning revenues of $557 million in 2014. iRobot is the maker of “Roomba,” the vacuum cleaning robot, and the “710 Kobra,” a bomb disposal robot capable of climbing stairs and lifting 300 pounds. Innovative technology has translated into strong results, as the firm reported positive net profits over the last decade. (iRobot 10K, February 13, 2015.)
iRobot has virtually no debt on its balance sheet and has over $186 million in cash. The firm reported strong first-quarter results on April 21, 2015, with home robot revenues up 5% and defense and security sales rising 17%, year-over-year. (iRobot Investor Relations, April 21, 2015.)
Management expects Roomba sales to grow at 11% to 13%, propelling total revenues to $625 million, or 12% higher than last year. Another catalyst for iRobot is that it has outsourced its manufacturing of consumer-focused products, enabling the company to lower costs and focus on design. Yet another tailwind is that the firm prices all its international sales in U.S. dollars, facing no translation losses arising from a stronger greenback. The year 2015 may prove to be stronger than expected for iRobot.
A Warning on the Risks of Small-Cap Technology Stocks
All investors looking to find the best small-cap technology stocks should always do their own research. Small-cap stocks often have an undiversified revenue stream and poor earnings visibility—making their results difficult to forecast. Risk-averse investors and those without an opportunity to perform detailed research should proceed with caution, as the possibility of losing money is high.
(Please note that these are not stock recommendations.)