We recently published a list of the 10 Best Small-Cap Stocks to Buy Now. In this article, we are going to take a look at where Marqeta, Inc. (NASDAQ:MQ) stands against the other small-cap stocks.

The S&P 500 index has reached its all-time highs, achieving returns of over 20% for the second consecutive year post-COVID. With the index hitting all-time highs, small-cap stocks can be a good option to explore with higher growth potential in the long term.

However, the Russell 2000 small-cap index returned a little over 7% in 2024 compared to the 23% returns by the S&P 500. Over the past five years (through February 25, 2025), the S&P 500 has almost doubled the return of the Russell 2000 small cap, with returns of 102% against 47%, respectively.

Small-Cap Stocks Prospects in 2025

On December 30, MJP Wealth Advisors chief investment officer Brian Vendig appeared on Yahoo! Finance’s Catalysts to address the potential outlook of small-cap stocks in 2025. Vendig said that a stable economy and policy will positively impact the small-caps, creating business expansion and merger opportunities. However, the Trump administration’s harsh tariff policies could impact the broader small-cap stocks as these companies contribute significantly to the U.S. domestic market.

The role of the Fed will also be key in keeping the economy afloat. Vendig said that the market is expected to be choppy in the first few months of 2025. Businesses will start to progress in the second half of 2025 as the policies become clearer. However, Vendig believed that if earnings remain intact, he will likely stay constructive on stocks. He is also bullish on bonds, which might be a good opportunity as well. He said:

“I’m definitely not one to recommend adding to mega-cap tech at this point, but I think taking a look at some of those value-oriented sectors that help to play into innovation and growth for the economy still makes sense.”

With that said, let’s take a look at the Best Small-Cap Stock to Buy Now.

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Our Methodology

We used the Finviz stock screener to compile a list of 30 small-cap stocks. We then selected the top 10 best small-cap stocks based on hedge fund sentiment as of Q4 2024. We have used analyst upside, as of February 27, as a secondary metric to rank the stocks with the same number of hedge fund holders. The list is sorted in ascending order of number of hedge fund holders.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Marqeta, Inc. (NASDAQ:MQ)

Analyst Upside: 36.61%

No. of Hedge Fund Holders: 37

Marqeta, Inc. (NASDAQ:MQ) is a leading global modern card issuing platform. The company offers virtual, physical, and tokenized credit and debit cards. It operates two business segments, Managed By Marqeta and Powered By Marqeta. Marqeta’s major clients include platforms such as Square, DoorDash, and Instacart. The company also offers Buy Now Pay Later (BNPL), neobanking, on-demand delivery, expense management, and crypto payment solutions.

Marqeta, Inc. (NASDAQ:MQ) has been facing increased regulatory scrutiny that has delayed program launches and impacted growth projections by 30% to 40%, with an average postponement of 70 days, affecting Q4 2024 and 2025 projections. To manage these short-term challenges, the company is focused on cost optimization and efficiency improvements. The company expects its adjusted EBITDA margin of 5% to 7% for Q4 2024 and approximately $50 million in 2025.

Despite the regulatory pressures, the company has done remarkably well, which indicates its strong growth potential. The company’s total processing volume (TPV) reached $74 billion in Q3 2024, a 30% year-over-year increase. The company posted a net revenue of $128 million in Q3, with a gross profit of $90 million, up by 25% from a year ago. For Q4 2024, the company projects its net revenue to grow between 10% to 12% and its gross profit margin between 13% to 15%.

Overall, MQ ranks 4th on our list of best small-cap stocks to buy now. While we acknowledge the potential of MQ as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

 

Disclosure: None. This article is originally published at Insider Monkey.