Is LanzaTech Global, Inc. (NASDAQ:LNZA) the Best Small Cap Stock to Buy According to Analysts?

We recently explored the best small-cap stocks to buy according to analysts. To visit this free list, click here.

Though LanzaTech Global, Inc. (NASDAQ:LNZA) ranks 5th in our list of the 8 Best Small-Cap Stocks Ready to Explode According to Analysts, we have analyzed the stock in detail.

Small-cap stocks are companies that have a market capitalization falling between $300 million and $2 billion.

We’ve often seen these smaller enterprises outshined by their large-cap counterparts, also because stocks like Google, Apple, Amazon etc. are known for their power to move entire markets. But it doesn’t mean that these small-cap stocks cannot present some golden opportunities for investment.

Small-cap stocks started gaining momentum during the last quarter of 2023, driven primarily by the AI-led rally that pushed the entire stock market high, thus putting away any immediate worries of an upcoming recession. According to Julius Baer, a private banking company based in Zurich, small-cap stocks have proven to, in fact, even outperform their larger-cap counterparts over very long periods. The report mentions that a dollar invested in US large-caps in 1926 grew in value to $5,767 by the end of 2018. Meanwhile, a single dollar invested in small-caps instead would have been worth a whopping $38,842 – almost seven times more.

However, what really makes these stocks attractive to investors is their potential for high returns. We will much more often see companies doubling their market capitalization from $1 billion to $2 billion, than let’s say from $1 trillion to $2 trillion. Small-caps tend to be fast-growing companies that can take more chances and respond to events and trends more efficiently than larger companies. Moreover, a recent analysis by MorningStar has revealed that small-caps look cheaper now relative to the broad market than at any time in the last 20 years.

But, of course, higher returns come with higher risks. Small-caps are highly vulnerable to macroeconomic factors and are thus more prone to market fluctuations, simply because they don't possess the same financial power as larger corporations, making it hard for them to survive unexpected emergencies. Additionally, these companies often have fewer outstanding shares, can’t borrow money as easily as bigger companies, and are more likely to have negative cash flows, leading to them paying lower or no dividends. They are also usually covered by fewer analysts and thus come with limited transparency and data for individual investors.

According to Marcio Silveira, a CFP, former equity analyst, and owner of Silvergreen Sustainable Investments:

“Since the 2010s, we’ve had some changes in how the economy works. All the top companies are tech companies now, and small-caps are underperforming because they can’t compete with these mega winner-take-all companies. You can find great opportunities in individual small-cap stocks, but you need to do a lot of fundamental analysis to find the hidden gems.”

LanzaTech Global, Inc. (NASDAQ:LNZA)

Upside Potential as of May 21st: 83.14%

Market Cap: $504.22 million

LanzaTech Global, Inc. (NASDAQ:LNZA) is a carbon recycling company that turns waste carbon into sustainable raw materials for everyday products.

In Q1 2024, the Illinois-based company reported a revenue of $10.2 million, an increase of 6% compared to $9.6 million in the first quarter of last year. The increase in revenue reflects growth in the company’s CarbonSmart and Joint Development Agreements & Contract Research businesses. Meanwhile, the company’s quarterly net loss also came down to $25.5 million, compared to a net loss of $63.3 million in the prior year period. On the 9th of May, LanzaTech Global, Inc. (NASDAQ:LNZA) filed a prospectus related to a proposed mixed-shelf offering of up to $300 million.

As the world strives to go carbon-neutral, LanzaTech Global, Inc. (NASDAQ:LNZA)'s business model addresses a wide range of environmental concerns. In addition to its strong Q1 earnings, the company's recent outlook includes a 55% YoY revenue growth this year.

Shares of LNZA were held by 7 hedge funds at the end of Q4 2023 in the Insider Monkey database, with a combined stake value of $1.074 million.

LanzaTech Global, Inc. (NASDAQ:LNZA) is included among the Top 5 Small-Cap Stocks Ready to Explode in 2024. Click to read the other Best Small-Cap Stocks Ready to Explode According to Analysts.

If you are looking for an AI stock that is as promising as Microsoft but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks. Disclosure: None. This article is originally published at Insider Monkey.