The 2025 investment landscape is expected to come with several opportunities as the global economy recovers from a long period of pressure from both inflation and elevated interest rates. The Federal Reserve continued to keep interest rates at 5.25% to 5.50% from July 2023 till September 2024.

However, as the inflationary pressure eased, the Fed started lowering the benchmark interest. With three cuts since September 2024, the benchmark rate is now at 4.25% to 4.50%. The initiation of interest rate cuts by the Federal Reserve and improving inflationary conditions have created a fertile ground for most businesses including some small-cap stocks.

Bet on These Five Small-Cap Stocks

Small-cap stocks are known for their growth potential and normally flourish in periods of moderated inflation and steady economic expansion. Here, we have picked five small-cap stocks — AudioEye, Inc. AEYE, Byrna Technologies Inc. BYRN, Climb Global Solutions, Inc. CLMB, Travelzoo TZOO and Hippo Holdings Inc. HIPO — that are strategically positioned to capitalize on the easing macroeconomic conditions in 2025. These stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).

The Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Per Zacks’ proprietary methodology, stocks with a combination of a Zacks Rank #1 or 2 and a Growth Score of A or B offer solid investment opportunities.

Our Picks

Climb Global Solutions is a value-added IT distribution and solutions company specializing in emerging and disruptive technologies. The stock currently sports a Zacks Rank of 1 and has a Growth Score of A.

CLMB stock has gained 123% in the past year. Climb Global Solutions is growing both organically and inorganically. To drive its organic growth, CLMB has recently expanded its footprint in Germany and introduced a new enterprise resource planning system. The company also acquired Douglas Stewart Software and integrated it with the DataSolutions Ireland division, which helped it add 20 new vendor partners.

The Zacks Consensus Estimate for 2025 earnings has been revised upward to $4.55 per share from $3.59 over the past 60 days. CLMB stock has soared 135% year to date (YTD) and has a market capitalization of $593 million.

AudioEye engages in creating cloud-based cross-platform/cross-browser screen reader solutions for web browsing. It focuses on creating voice-driven technologies to enhance the mobility, usability and accessibility of Internet-based content in the United States.  The stock currently carries a Zacks Rank of 2 and has a Growth Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

AudioEye has been benefiting from its innovative product portfolio and solid partnerships. A rich partner base further bolsters AEYE’s prospects. Its partnership with Finalsite, a market leader in K-12 education, is expanding its footprint in the education sector. An expanded partnership with CivicPlus allows AEYE to tap into more than 10,000 government clients and positions it to drive adoption within the local government market via tailored go-to-market strategies.

The Zacks Consensus Estimate for 2025 earnings has been revised upward to 69 cents per share from 58 cents over the past 60 days. The stock price of AEYE has soared with a return of 211.1% YTD. It has a market capitalization of $205.3 million.

Byrna Technologies is non-lethal technology company. It engages in the development and manufacture of innovative non-lethal equipment and munitions. The stock currently carries a Zacks Rank of 2 and a Growth Score of A.

The positive macroeconomic conditions have resulted in significant traction in the company’s product demand in Latin America. Byrna is ramping up its production capacity to meet rising demand and countering supply-chain risks by dual-sourcing its key components. BYRN expects strong demand for its products throughout 2025.

The Zacks Consensus Estimate for fiscal 2025 earnings has been revised upward to 23 cents per share from 20 cents over the past 30 days. BYRN stock has soared 351% YTD and has a market capitalization of $647.8 million.

Travelzoo is an internet media company. It engages in the provision of information to subscribers and website users about travel, entertainment and local deals available from companies. The stock currently carries a Zacks Rank of 2 and a Growth Score of A.

Travelzoo has recently introduced revised membership fees that are expected to substantially boost revenues in 2025. Alongside improving revenues, the company is making sure that its fixed costs are low, thereby translating to improved margins.

The Zacks Consensus Estimate for 2025 earnings has been revised upward to $1.21 per share from $1.19 over the past 60 days. TZOO stock has gained 118.1% and has a market capitalization of $245.4 million.

Hippo Holdings offers a different kind of home insurance, built from the ground up to provide a new standard of care and protection for homeowners. The company is a licensed property casualty insurance agent with products underwritten by various insurance companies. It currently carries a Zacks Rank of 2 and a Growth Score of A.

HIPO stock has gained 191.3% in the past year. Hippo Holdings has added new homebuilder partners in California, Florida and Texas to serve a bigger market segment. To recover from its trough, HIPO is now focusing on the Insurance-as-a-Service and Services segments, which are less exposed to underwriting and weather-related risks. The company is decreasing its net loss and improving the accident period loss ratio.

The Zacks Consensus Estimate for 2025 loss has narrowed to $1.85 per share from a loss of $2.45 per share over the past seven days. HIPO stock has soared 195.4% YTD and has a market capitalization of $656.3 million.

Hippo Holdings Inc. Price and Consensus

Hippo Holdings Inc. price-consensus-chart | Hippo Holdings Inc. Quote

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Travelzoo (TZOO) : Free Stock Analysis Report

Audioeye, Inc. (AEYE) : Free Stock Analysis Report

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Climb Global Solutions, Inc. (CLMB) : Free Stock Analysis Report

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