Gap Surging 15% Upon Strong Outlook for the Year

Author

Adam Garcia
November 22, 2024

Good morning. It's November 22nd, and we’ll look at why Gap shares are surging while Reddit and Intuit are struggling in premarket trade today. We’ll also review a tiny pharma stock that is surging by 60% before the market opens.

Previous Close 📈

U.S. stocks saw positive momentum on Thursday, with the Dow climbing 1% and the S&P 500 gaining 0.5%. Meanwhile, the Nasdaq Composite edged up slightly, gaining 0.03%.

Futures

Futures trading is subdued today, with S&P 500 futures slipping 0.1%, Nasdaq-100 futures falling 0.2%, and Dow Jones Industrial Average futures hovering near the flatline, down just 2 points.

Billion Dollar Industry

Goldman Sachs projects the global music market will surpass $160 billion by 2030, but a deeper transformation is already underway.

The next major economic wave in music will be driven by direct-to-consumer engagement and monetization, redefining how artists connect with their fans.

Much like Amazon and Shopify revolutionized eCommerce by cutting out traditional retailers, a new platform is empowering artists to bypass middlemen like streaming services, social media platforms, and ticketing agencies.

This innovative infrastructure enables artists to fully monetize their audience, strengthen relationships with top fans, and build a loyal base of superfans—proven to spend up to 80% more than the average listener.

With 15 granted patents and cutting-edge technology, this company is poised to lead the way in powering this direct-to-fan revolution. For investors, this represents a rare opportunity to join an industry poised for massive growth and transformation.

What to Watch

Buckle (NYSE: BKE), Global Blue Group Holding AG (NYSE: GB), ZKH Group Limited (NYSE: ZKH), Destination XL Group (NASDAQ: DXLG), and Sunlands Technology Group (NYSE: STG) will share their earnings before the market opens today.

Keep an eye on the S&P Flash U.S. Services PMI and Flash U.S. Manufacturing PMI for November, which will be released at 9:45 a.m. ET, followed by the final Consumer Sentiment Index for November at 10:00 a.m. ET.

Fed Governor Michelle Bowman will speak at 6:15 p.m. ET.

Clothing

Gap Starts Holidays Strong, Raises Full-Year Outlook Amid Tariff Concerns

Gap Inc. is experiencing early holiday season success, prompting CEO Richard Dickson to raise expectations for 2024. Despite third-quarter sales missing estimates at Old Navy and Banana Republic, Dickson’s strategy of refined marketing, enhanced inventory management, and stylish offerings appears to be paying off.

Shares are surging 15% in premarket trading today, buoyed by the company’s raised full-year guidance.

Third-quarter highlights include a 2% rise in net sales to $3.8 billion and a gross margin increase to 42.7%, surpassing Wall Street’s 42.1% projection.

Gap’s flagship brand has a 3% comparable sales gain, while Athleta’s is 5%, bouncing back from a 19% drop last year. Inventory management remains strong, with levels down 2% year-over-year, and the company’s cash reserves soared 64% to $2.2 billion.

One looming concern is potential tariffs from the incoming Trump administration. While only 10% of Gap’s products are sourced from China, Dickson acknowledged the broader inflationary risks to the industry but emphasized Gap’s flexible supply chain.

Technology

Advance Plans to Raise $1.2 Billion Credit Facility Backed by its Reddit Stake, Stock Plunges

Advance Magazine Publishers Inc., the publishing powerhouse behind Conde Nast, is planning to secure a credit facility using its stake in Reddit Inc., as per reports.

The shareholder aims to offer 7.8 million Reddit shares priced between $145.38 and $148.54 each, valuing the transaction at up to $1.2 billion. This price range reflects a discount of up to 8% compared to Reddit’s closing price of $158.02 on Thursday.

To preserve its ownership while raising funds, Advance is reportedly purchasing derivatives on the shares. This approach would enable the company to maintain its equity position while securing the credit facility, sources added.

Reddit shares, which have surged over 300% since the company’s IPO in March, are down 7.0% in premarket trading today.

The IPO raised $860 million earlier this year, and Reddit has since capitalized on investor enthusiasm for AI-related technologies, licensing its data to train artificial intelligence models.

This move by Advance follows recent Reddit-related activity, including Tencent Holdings Ltd.’s sale of nearly 655,000 Reddit shares earlier this week, yielding $88.5 million.

The transaction reflects growing interest in leveraging high-performing tech stocks for financial flexibility as Reddit continues to benefit from its post-IPO momentum.

Technology

Intuit's Second-Quarter Guidance Falls Short Despite Strong Q1 Earnings

Intuit shares dropped 6% in after-hours trading Thursday following the release of a quarterly forecast that fell short of market expectations due to delayed revenue from changes in TurboTax promotions.

The financial software maker reported adjusted earnings of $2.50 per share, surpassing analyst estimates of $2.35, while revenue reached $3.28 billion, ahead of the $3.14 billion. Despite a 10% year-over-year revenue increase, net income declined to $197 million, or 70 cents per share, from $241 million, or 85 cents per share, a year earlier.

For the second quarter, Intuit projects revenue between $3.81 billion and $3.85 billion, below the $3.87 billion consensus, with adjusted earnings of $2.55 to $2.61 per share versus expectations of $3.20. The company attributed the shortfall to delayed revenue recognition from TurboTax software sales, though it emphasized no impact on full-year fiscal guidance.

Intuit’s small business and self-employed segment, rebranded as global business solutions, contributed $2.5 billion in revenue, up 9% year-over-year. CreditKarma outperformed, generating $524 million, exceeding analyst estimates of $430 million.

CEO Sasan Goodarzi expressed optimism about economic conditions in 2025 and highlighted ongoing efforts to reduce churn among smaller customers in MailChimp. Meanwhile, concerns linger over federal discussions of a tax-filing app, though Intuit affirmed its existing mobile solutions.

Year-to-date, Intuit shares have risen 9%, trailing the S&P 500's 25% gain.

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Movers and Shakers

Elastic NV [ESTC] - Last Close: $94.13

Elastic NV's stock is up 28.50% in premarket trade following a stellar earnings report that surpassed Wall Street expectations, signaling robust demand for its data analytics products.

The company’s profit of 59 cents per share on revenue of $365 million is significantly above analysts’ forecasts of 38 cents per share on $354 million in revenue.

Elastic is also raising its fiscal 2025 revenue guidance to $1.451–$1.457 billion, beating analysts' expectations of $1.441 billion.

This positive outlook, combined with strong quarterly results, has fueled investor optimism, causing the stock to rally sharply in premarket trading.

My Take: ESTC hasn’t had the best of years, with its shares facing a sharp decline after the previous earnings report didn’t turn out as per Wall Street expectations. Nonetheless, this stock is definitely worth keeping your eye on.

Virpax Pharmaceuticals [VRPX] - Last Close: $0.59

Virpax Pharmaceuticals' stock is surging by 60% in premarket trade today.

The firm announced an extended collaboration with the National Center for Advancing Translational Sciences (NCATS) yesterday.

This extension focuses on the development of NES100, Virpax's product candidate for managing acute and chronic non-cancer pain.

The continued partnership with a federal entity like NCATS is viewed positively by investors, as it enhances the credibility and potential success of Virpax's pain management treatments.

My Take: This partnership could be a true game changer for VRPX. Keep your eye on this tiny stock for future growth.

Jeffs’ Brands [JFBR] - Last Close: $3.08

Jeffs' Brands is up 15% in premarket trading due to its newly announced patent licensing agreement with Xiamen Fast Power Co., Ltd., a Chinese company specializing in photovoltaic technology.

The agreement grants Jeffs' Brands exclusive rights to market and sell Xiamen's patented waterproof photovoltaic board technology globally on Amazon for three years.

This partnership enables Jeffs' Brands to diversify its product offerings in the growing renewable energy sector, targeting the rising demand for sustainable energy solutions.

The company sees this as a significant opportunity to boost revenue and expand its market presence.

My Take: JFBR is down 90.60% YTD and is struggling with profitability, so it might be best to keep this on your wait and watch list for now.

Music Industry

The music industry is on the brink of a monumental shift, with Goldman Sachs forecasting a $4.2 billion addressable market emerging from the monetization of superfan products and experiences.

Protected by 15 granted patents, this innovative infrastructure allows artists to scale personalized fan experiences, creating new revenue streams and driving growth across the industry.

With the potential to capture 60% of this market by 2027, the opportunity for investors to benefit from this evolution is significant.

Top artists and major record labels are already taking notice, signaling the scale of this market potential. Early investors are uniquely positioned to capitalize on what could become a defining shift in how music is monetized.

Everything Else

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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