Investing in the small side of the share market carries more risk than other areas.
But if your tolerance for risk 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. If you can catch a small cap before it becomes a mid cap or even a large cap, the returns could be sensational.
With that in mind, here are two small cap ASX shares that analysts rate highly:
Airtasker Ltd (ASX: ART)
The first small cap ASX share that has been named as a buy is Airtasker.
It is growing online marketplace for local services with an estimated total addressable market of $600 billion across Australia, the UK, and the US.
Morgans is a big fan of the company. This is due to this significant market opportunity and its attractive business model. The broker also highlights that the company is operating in a market that is in the early stages of ecommerce adoption. It feels this puts Airtasker in a great position to benefit as the shift accelerates.
At the end of July, the broker retained its add rating with a trimmed price target of $1.25. This is more than double the current Airtasker share price.
PlaySide Studios Limited (ASX: PLY)
Another small cap ASX share that has been tipped as a buy is PlaySide Studios.
It is one of the largest video game developers in the ANZ region. Playside has developed a portfolio of games independently and in collaboration with studios such as Disney, Pixar, Warner Bros, and Nickelodeon.
In addition, over the last couple of years, the company has signed a number of work for hire deals with games publishing giants including 2K Games and Activision Blizzard. This could see the company work on some major titles for these gaming giants, which has the potential to give its reputation a huge boost and support further work for hire contract wins.
Last week, analysts at Ord Minnett retained their speculative buy rating and 85 cents price target. Based on the latest Playside share price of 67.5 cents, this implies potential upside of 26% for investors.
