It’s a new day in the stock market, and that means it’s a new opportunity to take a look at some high-flying stocks. One of today’s leading names is Digital Brands (NASDAQ:DBGI), a micro-cap company that has rocketed higher in today’s session. In fact, DBGI stock is now up more than 150%. This spike comes less than a day after the company filed a Form 8-K with the Securities and Exchange Commission (SEC).
This 8-K details a previous press release by the company, in which Digital Brands’ management team reaffirmed its revenue forecast for the year. The company expects to see between $27 and $30 million of revenue in 2024. As well as $6-7 million in internal free cash flow and $1.5-2 million in EBITDA.
The market clearly likes what they’re hearing about this company, but let’s dive deeper into the mechanics of this move and what may be driving such incredible interest in this stock.
Why Is DBGI Stock Surging Today?
To get a feeling for what could be driving such an enormous move in this stock, it’s important to look at volume, for starters. At the time of writing, more than 61 million shares have traded hands. That’s relative to DBGI stock’s average trading volume of around 125,000 shares. Such high volume suggests that this relatively low-float stock could be seeing a supply and demand problem for its shares. Continuous buying pressure is pushing shares higher as sellers continue to hold through this spike.
Notably, the company’s share price, at just above $9 per share this afternoon (and at less than $3 per share as of yesterday’s close), can amplify price swings considerably. And despite a relatively low short interest (only around 3% of the company’s float is sold short, per Fintel), any sort of uptake from short sellers could induce a continued spiral higher.
Now, I wasn’t able to find options available for this stock, and that could be related to the company’s very small market capitalization of less than $10 million (after today’s surge). Accordingly, there aren’t any delta or gamma squeezes investors can point to for this move.
Rather, it appears investors seem to like what they’re seeing with the company’s reaffirmed guidance. Indeed, if Digital Brands can pull in $30 million of revenue and $7 million of cash flow at the high end of its estimates, its current market capitalization certainly seems cheap. Thus, maybe there is room to run for this little-known stock.
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On the date of publication, Chris MacDonald 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.
