The Russell 2000 (^RUT) is home to many small-cap stocks, offering investors the chance to uncover hidden gems before the broader market catches on.
However, these companies often come with higher volatility and risk, as their smaller size makes them more vulnerable to economic downturns.
Shares of online fashion resale marketplace ThredUp (NASDAQ:TDUP)
jumped 44.7% in the afternoon session after the company reported strong first quarter 2025 results which beat analysts' sales, earnings and EBITDA estimates. In addition, it provided optimistic full-year revenue guidance that blew past analysts' expectations.
What stood out was the flood of new shoppers, up nearly 95%, making it the best quarter ever for signups. This helped push sales up 10% from the previous year. On the other hand, the number of orders missed. Still, we think this was a solid print.
The session on Tuesday is off to an intriguing start with several stocks showing significant price gaps. Let's examine the gap up and gap down stocks in today's session.
Online fashion resale marketplace ThredUp (NASDAQ:TDUP) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 10.5% year on year to $71.29 million. On top of that, next quarter’s revenue guidance ($73.5 million at the midpoint) was surprisingly good and 3.7% above what analysts were expecting. Its GAAP loss of $0.04 per share was 42.9% above analysts’ consensus estimates.
Unprofitable companies face headwinds as they struggle to keep operating expenses under control.
Some may be investing heavily, but the majority fail to convert spending into sustainable growth.
ThredUp has been on fire lately. In the past six months alone, the company’s stock price has rocketed 489%, reaching $4.20 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
A number of stocks jumped in the afternoon session after investor sentiment improved on renewed optimism that the US-China trade conflict might be nearing a resolution. According to reports, Treasury Secretary Scott Bessent reinforced this positive outlook by describing the trade war as "unsustainable," and emphasized that a potential agreement between the two economic powers "was possible."
His comments signaled to markets that both sides might be motivated to seek common ground, raising expectations for reduced tariffs and more stability across markets.
Small-cap stocks can be incredibly lucrative investments because their lack of analyst coverage leads to frequent mispricings.
However, these businesses (and their stock prices) often stay small because their subscale operations make it harder to expand their competitive moats.
