3 Small-Cap Stocks to Watch After the Fed’s Rate Cuts

Key Points

• Small-cap stocks could benefit from the Fed’s latest rate cut cycle.
• Analysts are bullish on a trio of low P/E stocks with growth catalysts.
• Technology and biotech names stand out for long-term upside potential.

The Russell 2000 index (i.e., the small-cap stock index) is up about 2.5% in the five days ending September 19. It’s not a surprise that this is coming during a time in which the Federal Reserve lowered interest rates.

This cut does not matter much, but many are optimistic that it is the beginning of a deeper rate cut cycle in the next 12 months.

That’s typically bullish for small-cap stocks that are frequently unprofitable and, in some cases, have little to no revenue. Companies like these that require debt to fund their operations can be among the largest beneficiaries of lower interest rates.

However, rate cuts alone aren’t a reason to buy a stock. What matters more is analyst support, business fundamentals, and risk profile.

These three small‑cap names have bullish analyst sentiment backing the potential for gains.

The three stocks in this article have bullish analyst sentiment to support further growth. It probably won't come as a surprise to you that two are technology stocks, and one is a biopharmaceutical company.

Identiv: Turning the Page on Margin Through Acquisition & Pivoting

With a market cap of just over $80 million, Identiv Inc. NASDAQ: INVE is a global provider of RFID and NFC reader modules, smart card and credential technologies, access control hardware, secure IoT (internet of Things) connectivity, and contactless identification solutions. 

INVE stock has gained roughly 18% over the past three months, even though its latest earnings report showed revenue of $5.04 million, down sharply from $6.74 million in the same quarter of 2024 and even lower compared to results from two years ago. However, one reason for the company’s recent performance is that it’s pivoting away from lower-margin businesses and transitioning its production to a new facility in Thailand.

Identiv believes that long-term demand for its technology is still intact, despite short-term costs associated with this pivot. That’s also why rate cuts are significant for Identiv, which embarks on a growth-through-acquisition pivot into higher-margin businesses. That will require taking on debt, which is easier to finance in a lower-rate environment.

Analysts give INVE stock a consensus Buy rating with a $5.33 price target, a potential 47% increase from its current levels.

Immersion: Haptic Tech Growth With Accounting Clouds

Immersion Corporation NASDAQ: IMMR competes in the haptic technology market, currently valued at around $4 billion to $5 billion, with compound annual growth rate (CAGR) projections of around 7-10% for the next five to seven years. 

Instead of pure hardware sales, Immersion primarily licenses its technology to device manufacturers, earning its revenue through royalties and settlements. The company is widely viewed as the de facto gatekeeper of intellectual property (IP) in the haptic space, and this leadership position gives it leverage over other OEMs.

Immersion is a profitable company that’s been growing its revenue sharply in the last 12 months. Analysts are bullish on IMMR stock, giving it a $12.25 consensus price target, which would be a gain of 67% from its price from where it currently trades.

One note of caution is that Immersion delayed its 10-Q filing due to an internal investigation at its subsidiary Barnes & Noble Education related to how it recorded costs of digital sales and revenue recognition. The company also received a Nasdaq delinquency notice for failing to timely file their annual 10‑K because of the same accounting issues at BNED.

Emergent BioSolutions: Stability Through Government Contracts

Small-cap biotechnology companies are frequently attractive targets for traders, but Emergent Biosolutions NYSE: EBS may be a name for investors with a long-term focus to consider.

Emergent is the most established company on this list. Its $432 million market cap reflects a mature business model that supplies medical countermeasures to the U.S. government.

Because these government contracts are tied to national security and public health preparedness, they provide recurring revenue streams. In September 2025, for example, the company was awarded three separate contracts and/or contract modifications totaling over $90 million. This means Emergent will have stable cash flows even when other biotech ventures are experiencing volatility.

As of this writing, EBS stock trades at around $8.10 per share, but analysts give the stock a $13.50 price target and a consensus Buy rating.