ASX small-cap shares are underperforming in 2026 amid four interest rate rises from the Reserve Bank and one in the US.
The S&P/ASX Small Ords Index (ASX: XSO) has collapsed 18% in the calendar year to date (YTD).
Meanwhile, the S&P/ASX All Ords Index (ASX: XAO) has fallen 2%.
Morgans reckons there are buying opportunities among the small caps today.
Let’s check out three that the broker highlighted in new notes this week.
Atomic Eagle Ltd (ASX: AEU)
Atomic Eagle shares are 35 cents, down 6.7% today and up 46% since listing last November.
Morgans has initiated coverage with a speculative buy call on this ASX small-cap energy share.
The broker has a 12-month price target of 80 cents.
This indicates a potential 128% upside ahead.
Morgans said:
AEU offers exposure to Muntanga, a simple, low-capex heap leach uranium project in Zambia, plus a 60% interest in the high-grade Madaouela project in Niger. Buy Muntanga, get Madaouela for free.
AEU trades on just A$2.1/lb EV/resource versus the peer average of A$4.8/lb. In our view, the market is largely valuing Muntanga alone, with Madaouela’s 116.5Mlb U3O8 foreign resource estimate contributing little to the current share price despite its scale, grade and strategic importance.
Near-term catalysts include Madaouela JORC conversion (end-2026), Muntanga North drilling results (Q4 2026) and a Muntanga resource upgrade as AEU works toward its 100Mlb+ target.
Baby Bunting Group Ltd (ASX: BBN)
The Baby Bunting Group share price is $1.07, down 2.7% today and down 62% over 12 months.
Morgans has a buy rating on this ASX small-cap consumer discretionary share.
The broker has a 12-month share price target of $1.62.
This implies a potential 51% upside ahead.
Morgans said:
BBN has provided a trading update for the first 14 weeks of FY27 which was broadly in line with expectations.
Comparable sales growth has moderated to +2.2% from +4.3% in the first 6 weeks of FY27 driven by the ramp up of temporary store closures in the period.
17 stores have now been refurbished to the Store of the Future format; they continue to deliver strong results, with average sales growth of 20% in the first year after re-opening, which sits within the 15-25% target range.
BBN has reiterated FY27 guidance for pro-forma NPAT of $19-21m, with sales of $585-600m (3-5% LFL sales growth), and 42% gross margin. Capex guidance was also maintained at $33-37m.
BBN is trading on <8x FY27F PE, which we believe undervalues its earnings growth profile over the next few years.
MotorCycle Holdings Ltd (ASX: MTO)
The MotorCycle Holdings share price is $2.89, up 0.4% today and down 11% over 12 months.
Morgans has a buy recommendation on this ASX small-cap retail share.
The broker has a 12-month price target of $4.30.
This suggests a potential 48% upside ahead.
Morgans said:
MTO’s investor day reinforced a business transformed in scale and mix, with wholesale driving earnings in a challenging market, retail and data offering the next leg of improvement, and FY31 targets giving clarity on the growth trajectory ahead.
The group set FY31 targets (A$1.2bn+ revenue, ~6% implied ROS) pointing to ~8% pa sales growth and ~11-15% pa PBT growth over the 5 year period.
We’re encouraged by MTO’s clear strategy ahead. We think the market overlooks MTO’s wholesale business, which has meaningful growth levers across product, categories and partnerships.
We see scope for Retail upside from Harley-Davidson scale, ongoing brand rationalisation and data and systems integration.
Double-digit earnings growth and a net cash balance sheet look compelling on ~7x PE.
The post 3 ASX small-cap shares with 48% to 128% upside ahead: Morgans appeared first on The Motley Fool Australia.
Wondering where to invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes could be the ‘five best ASX stocks’ for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now…
* Returns as of 6 March 2025
More reading
- Could this ASX uranium developer more than double in value?
- This high-dividend ASX small cap could rise more than 50%: Broker
- Lovisa vs Baby Bunting: Which ASX retailer is the better buy today?
Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Harley-Davidson. The Motley Fool Australia has recommended MotorCycle. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.