Investing in the small side of the share market carries more risk than other areas.
However, if your risk tolerance allows for it, having a bit of exposure to the small side of the market could be a good thing for a balanced portfolio. This is due to the potential returns on offer from promising small caps.
With that in mind, here are three small cap ASX shares to watch closely:
Airtasker Ltd (ASX: ART)
The first small cap ASX share to consider is this growing online marketplace for local services. The team at Morgans is very positive on Airtasker due to its belief that the company has a very attractive business model and a significant market opportunity. The broker highlights that the company's product works for both sides of the marketplace, has attractive unit dynamics with healthy gross and contribution margins, and an enormous total addressable market (TAM) which is in the early stages of ecommerce adoption. It also sees opportunities for Airtasker to expand globally. Morgans has an add rating and $1.27 price target on the company's shares.
PlaySide Studios Limited (ASX: PLY)
Another small cap ASX share to watch is PlaySide Studios. It is one of the largest independent video game developers in Australia with a portfolio comprising 50+ titles. Among these titles are games developed in collaboration with studios such as Disney, Pixar, Warner Bros, and Nickelodeon. PlaySide has also recently announced promising deals with games publishing giant 2K Games and gaming influencer company One True King. Canaccord Genuity currently has a buy rating on its shares. Though, a 30% gain on Monday has taken its shares beyond the broker's price target. Thus, investors may want to wait for the broker to assess the company's latest update before considering an investment.
SILK Laser Australia Limited (ASX: SLA)
A final small cap ASX share to look at is SILK Laser. It is one of Australia's largest specialist clinic networks, offering a range of nonsurgical aesthetic products and services. This includes laser hair removal, cosmetic injectables, skin treatments, body contouring, and skincare products. Pleasingly, SILK has continued to experience strong demand for its services during the pandemic, which has underpinned robust sales and profit growth. The good news is that management doesn't expect its growth to stop there. Particularly given its plan to expand its clinic materially over the next decade. Wilsons is bullish on the SILK share price and has an overweight rating and $5.25 price target on its shares.
