September is living up to its reputation for being one of the worst months to own stocks. And here’s a spoiler alert…October isn’t shaping up to be much better. In fact, with interest rates likely to keep rising into 2023, an earnings recession is a near certainty. With that in mind, you’d have to be crazy to invest in small-cap stocks right now, right?

Yes and no. Small-cap stocks always carry outsized risk. And in bear markets that risk increases. But these are also frequently the stocks that offer investors the best chance for market-beating gains. And since these stocks tend to trade at a lower price than established blue-chip stocks, accumulating in bear markets may be a strategy that pays off handsomely down the road.

Guessing how long that road is or what twists and turns are still to come is a fool’s errand. So investing in small-cap stocks right now is only for the most risk-tolerant investors. Still, if that describes you and you have time on your side and are willing to put a small amount of capital at risk, here are seven small-cap stocks that have an opportunity to deliver extraordinary gains.

Celularity (CELU)

Like many biotechs, Celuarity (NASDAQ:CELU) is an early-stage biotech company. This means it has little to no revenue and is not yet profitable. Patience will be required because the company is not likely to be profitable for several years.

It does, however, have four oncology product candidates using its IMPACT platform in clinical trials with one entering Phase II. Celularity’s pipeline also includes two candidates for degenerative diseases that are still in the pre-trial stage.

CELU stock got a boost earlier in 2022 due in large part because the company received “fast track” designation for one of the products in its pipeline. However, broader concerns about risk-off assets have taken their toll on the stock.

In addition to time, bringing these candidates to market requires money. There also has been some concern about the company’s cash burn. However, the company recently entered into a $150 million pre-paid advance agreement with Yorkville that should alleviate some of those concerns.

Celuarity was founded in 2016 as a spin-off from Celgene and has only been publicly trading since 2019.

Dave & Buster’s Entertainment (PLAY)

I made a bullish call about Dave & Buster’s Entertainment (NASDAQ:PLAY) in July, and right up until the company’s earnings report that looked like a pretty good call. PLAY stock was up approximately 35% from mid-July to early September.

But the stock is being dragged down as investors flee to risk-off assets. The company did itself no favors with an earnings report that pointed to an earnings recession due to inflation.

With all that said, analysts appear to be maintaining their optimism about PLAY stock. Since the earnings report, two analysts have boosted their price targets on the stock. And the stock currently has a consensus price target of $51.50 which suggests a 61% upside.

My belief in July was that Dave & Buster’s would be a beneficiary from the start of football season and the fantasy football drafts that precede it. With a busy fall sports calendar and with the company pursuing international expansion, I’ll remain bullish on PLAY stock.

Smith & Wesson Brands (SWBI)

Smith& Wesson Brands (NASDAQ:SWBI) is next on this list of small-cap stocks.

SWBI stock is down 42% so far this year, and the company’s earnings report didn’t help matters.

The company missed significantly on both its top and bottom lines, and there are questions about the company’s revenue and earnings growth over the next five years.

However, at least one analyst, Mark Smith at Lake Street Capital maintained the firm’s buy rating on the stock citing its disciplined focus on long-term goals. Other analysts are confident that the most recent quarter marked a bottom for earnings and margins.

That analysis tracks with the fact that when you look at SWBI strictly from a fundamental standpoint, it appears to be undervalued. The stock is trading at a P/E ratio of just over 4. Something else to consider is that stocks generally go up after mid-term elections, and gun stocks could have a rally no matter which party wins the day.

Axcelis Technologies (AXLS)

There are some investors who believe that the historic run in semiconductor stocks is getting long in the tooth. But there’s nothing to suggest that in the order sheet of Axcelis Technologies (NASDAQ:AXLS).

The company is a key provider of custom “ion implanters” that are used to make semiconductor chips. And more specifically, chip makers rely on Axcelis’ technology to make the chips that power the sensors of electric vehicles (EVs).

The company continues to deliver strong revenue and earnings and has a backlog that is at record levels. Part of the reason the stock’s down may be that the company is at the leading edge of semiconductor demand so it may be the first to experience weakness.

However, it’s also likely getting lumped in with other risk-off assets. With that in mind, analysts have a price target of $92.99 for AXLS stock which is a 59% increase from the current price.

Camping World (CWH)

Camping World (NYSE:CWH) was a pandemic winner as many individuals rediscovered (out of necessity) their love of the great outdoors.

Shelter-in-place orders sparked a surge in recreational vehicle and boat sales. And one thing is true for RV and boat owners. Once you own one, you’ll find any reason to make use of them. That works to the benefit of Camping World.

CWH stock is trading near the bottom of its 52-week range. The thing that investors should be the most excited about, though, is the company’s dividend which has a very attractive yield of over 9%. While the company may not be able to keep raising its dividend at the same rate as it has for the last couple of years, it does appear to be stable.

FTC Solar (FTCI)

FTC Solar (NASDAQ:FTCI) is another stock that I was making a bullish call on in July. That was before the passage of the Inflation Reduction Act which sets aside a good bit of congressional largesse for the solar industry.

As I mentioned at that time, this is a relatively new company that has only been trading publicly since 2021, and the year hasn’t been kind to the stock. FTCI stock is down 61% in the last 12 months and is trading near its 52-week low. And to add even more risk to the stock, short interest is over 12%.

However, this is a company that operates in a specific niche. Specifically, it provides solar tracker systems, technology, software, and engineering services. As solar usage expands throughout the country, the company should begin to generate revenue and earnings.

One concern may be that the stock has a niche, but not a moat. Right now that doesn’t seem to concern analysts who have a consensus buy rating for FTCI stock with a price target of $6.82 which is 105% above the current price.

Wheels Up Experience (UP)

The last stock on my list of small-cap stocks to buy is the private jet company Wheels Up Experience (NYSE:UP). The stock is trading near its 52-week low and fundamentally there’s not a lot to suggest this stock is anything but a lottery ticket.

But lottery tickets can pay off and with UP stock in the penny stock range, it may be worth a speculative bet for the most risk-tolerant investors. My reasoning is two-fold.

First, as Josh Enomoto pointed out the wealth gap in the country is increasing. This is coming at a time when airline travel still feels a bit like a crapshoot. It’s a perfect storm to stoke demand.

Second, as the company’s name suggests, if groups are planning a destination travel event, the cost of a private jet could be deferred and what an experience that could create.

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.