Investing in the small side of the share market carries more risk than other areas. But if your risk tolerance allows for it, having a bit of exposure to this side of the market could be a boost 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 analysts rate highly:
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Airtasker Ltd (ASX: ART)
The first small cap ASX share to consider is this growing online marketplace for local services. Management notes that the company has a huge market opportunity to grow into in the future. It estimates that it has a total addressable market of $600 billion across just Australia, the UK, and the US. The team at Morgans is very positive on Airtasker due to this significant market opportunity and its attractive business model. The broker notes that the company's product works for both sides of the marketplace, has attractive unit dynamics with healthy gross and contribution margins, and is in a market that is in the early stages of ecommerce adoption. Morgans has an add rating and $1.25 price target on the company's shares.
Bigtincan Holdings Ltd (ASX: BTH)
Another small cap to watch is Bigtincan. It is a provider of enterprise mobility software that allows sales and service organisations to improve mobile worker productivity through smart devices. The company notes that global businesses including Nike, Guess, Prudential, and Starwood Hotels use its software to allow customer-facing teams to intelligently prepare, engage, measure and continually improve the experience of their customers. Morgan Stanley is a fan of Bigtincan and has an overweight rating and $2.10 price target on its shares.
PlaySide Studios Limited (ASX: PLY)
A final small cap ASX share to watch is PlaySide Studios. It is one of the largest video game developers in Australia. It has a growing portfolio of games, including ones developed in collaboration with studios such as Disney, Pixar, Warner Bros, and Nickelodeon. PlaySide has also recently announced work for hire deals with games publishing giants 2K Games and Activision Blizzard. This appears to demonstrate its growing reputation within the industry. Canaccord Genuity currently has a buy rating and $1.30 price target its shares.
