Freedom Broker spotlights three small caps ahead of Santa Claus rally
Freedom Broker analysts have highlighted three small-cap stocks to watch as the so-called Santa Claus rally approaches. This is the traditional rise in stock prices before Christmas and into the early days of January. Among the highlighted companies is Perfect Corp., which is making AI solutions for the fashion and beauty sector.
Vox Royalty Corp
Canada’s Vox Royalty is a play on precious metals — primarily gold — without direct operational risks, according to Freedom Broker analysts. Vox is a mining royalty company, receiving payments from firms developing its mines without being involved directly in mining. The company’s portfolio includes over 60 royalties in six jurisdictions, as noted by Vox.
Freedom Broker analysts believe the rally in gold prices could be sustained in the short term, given persistent demand from both consumers and central banks. For instance, in November, the PBoC resumed gold purchases after a five-month pause, while global demand for the metal in the third quarter of 2024 exceeded $100 billion — a record for that quarter.
Vox Royalty will benefit from the higher gold prices. Alongside the potential for organic growth, new assets and expansion of existing ones could enhance the company’s financial performance, Freedom Finance Global analysts say. In its third-quarter financial report, Vox announced the first gold production at the Bulong-Myhree site, record extraction volumes at the Janet Ivy mine, and progress on the Castle Hill and Plutonic East projects — all located in Australia.
These factors make the company’s shares particularly attractive as the Santa Claus rally nears, according to Freedom Broker.
On Wednesday, December 18, Vox Royalty stock fell 4.56% to $2.30 per share, the lowest closing price since June. According to MarketWatch, all five analysts covering the stock rate it a “buy.” Their average target price is $4 per share, suggesting 67% upside versus the last close. Freedom Broker’s target price implies 37% upside over a 12-month investment horizon and a 15% gain in the next 3-4 months.
Gaia, Inc.
Gaia is a company in the wellness and mindfulness industry that provides a wide array of digital streaming services focused on personal transformation, according to Freedom Broker analysts. Most of the content is about yoga, alternative medicine, and “truth-seeking.” Gaia also offers themed travel services to its community, which reportedly includes over 800,000 members across 185 countries.
Historically, streaming company stocks perform strongly during the Santa Claus rally, Freedom Broker notes. This is attributable to an influx of subscribers and higher content consumption and ad revenue as people spend more time at home during the holidays and with colder weather. Freedom calculated that Gaia shares delivered an average January return exceeding 10% over the last five years. Additionally, Gaia began raising subscription prices in the third and fourth quarter, while its management is implementing AI for better, more adaptive content translation into other languages.
“We believe subscriber growth in December and January, combined with price increases, could lead to strong financial results in the coming quarters,” Freedom Broker wrote.
On Wednesday, December 18, Gaia stock dropped 11.6% to $4.40 per share, its lowest closing price since August. According to MarketWatch, the two analysts who cover Gaia have “buy” calls on it with an average target price of $8.17 per share, for 86% upside versus the last close.
Perfect Corp.
Ahead of the Santa Claus rally, Perfect Corp., which gives consumers the ability to virtually try on makeup by using its AR- and AI-enabled software, appears particularly attractive to investors, Freedom Broker analysts say. This is largely a factor of the rapid adoption of AI into the beauty and fashion sector. Founded in 2015, Perfect Corp. develops AI-driven solutions for both brands and individual consumers.
These include virtual makeup apps, personalized skincare recommendations, and digital skin diagnostics, Freedom Broker notes. They are in high demand during the holiday season as millions of people shop for beauty products, analysts say.
Major cosmetics brands using Perfect Corp.’s solutions include Estée Lauder, Shiseido, Chanel, and LVMH (which owns Guerlain, Fenty, and Sephora). Amid seasonal sales and holiday shopping sprees, Perfect Corp.’s digital tools provide a competitive edge for beauty retailers and will boost Perfect Corp.’s profitability, Freedom Broker writes.
Yet the stock is good for the long term too, “thanks to the robust potential of its technologies and market leadership,” Freedom Broker argues.
“Beauty AI is not just a trend but a key element of the beauty industry’s future, and Perfect Corp. is at the forefront of this revolution,” the analysts write.
On Wednesday, December 18, Perfect Corp. stock dropped 6.17% to $2.13 per share. According to MarketWatch, the stock has three “buys” and one “hold” among coverage analysts. Their average target price is $3.70 per share, implying 73% upside from the last closing price.
Context
The Santa Claus trading window opens on December 24. Historically, the main U.S. index, the S&P 500, has risen during this seven-day period in 79% of cases, gaining about 1.3% on average, according to Business Insider.
Explanations for this phenomenon range from general holiday optimism to annual bonuses, which investors may push back into stocks, as noted by IG.
“Stocks tend to do well in the absence of news and this is why strength around holidays tends to occur,” said Ryan Detrick, chief market strategist at Carson Group, in an interview with the publication.
