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Gap (GPS) Jumps 11% in a Month: Is it an Ideal Time to Buy?
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The Gap Inc. stock has regained some of its lost sheen in the past month. The comeback has mainly been driven by a financial recovery, fueled by rising market share and a stronger brand presence. The company has expanded its market share for five straight quarters. Additionally, it has been reinforcing its brand relevance through a savvy reinvigoration strategy.
In the past month, the company’s shares have rallied as much as 11.5%, surpassing the industry peers and the broader S&P 500 index’s rise of 2.6% and 0.4%, respectively. The company also outperformed the broader Zacks Retail-Wholesale sector's growth of 1% in the same period.
At the current price, the stock trades at a 19.7% discount to its 52-week high of $30.59 reached on Jun 3, 2024, when it reported strong first-quarter fiscal 2024 numbers. The company’s better-than-expected first-quarter fiscal 2024 performance demonstrates a comeback on the financial front.
Image Source: Zacks Investment Research
Additionally, GPS is trading above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in GPS’s financial health and prospects.
Gap Stock Trades Above 50 and 200-Day Moving Average
Image Source: Zacks Investment Research
Strategies Support Gap’s Rally
The stock’s upward trajectory is well-supported by its ability to tap favorable trends in the fashion industry, digital endeavors and robust strategies. The company has carved out a niche with its four distinct brands — Gap, Old Navy, Banana Republic and Athleta — each catering to different market segments and providing diverse revenue streams. Its recent turnaround also underscores the resilience of its business model and effective cost-management strategies.
Gap is poised to strategically position itself for sustained growth, with management focused on curating trend-right merchandise, strengthening customer relationships through marketing, advancing its digital commerce agenda and efficiently managing costs. By leveraging its rich retail heritage and a portfolio of iconic brands, the company has undertaken multiple initiatives to ensure long-term success in a rapidly evolving retail landscape.
Old Navy’s emphasis on value-driven fashion and Athleta’s strong position in the thriving activewear market present significant growth opportunities. Old Navy continues to be a powerhouse brand, accounting for more than half of the company’s sales. Also, Athleta has immense potential to tap into the growing demand among women in athletics.
The company is also making strides in repositioning Banana Republic to excel in the premium lifestyle segment. Meanwhile, management has received praise for revitalizing the Gap brand, reviving its legacy of offering merchandise that appeals to "every generation."
Gap’s aggressive cost-management efforts, including streamlining its operating model with reduced airfreight and promotional activities, have been yielding positive results. The company has maintained a disciplined approach to margin expansion, expense and inventory management, and preserving a strong balance sheet, leading to significantly improved operating profit and cash flow in the first quarter of fiscal 2024. Operating income improved significantly, rising to $205 million from a loss of $10 million in the previous-year quarter.
Upward Estimate Trajectory for GPS
The Zacks Consensus Estimate for Gap’s fiscal 2024 and 2025 earnings per share rose 1.7% and 2.1%, respectively, in the last 30 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
For fiscal 2024, the Zacks Consensus Estimate for GPS’s sales and EPS implies 0.2% and 24.5% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 1.9% and 8.8% year-over-year growth, respectively.
Gap Stock Undervalued
The company is currently trading at a discount to its industry on a forward 12-month P/E basis, making the stock an attractive pick for investors. Gap is currently trading at a forward 12-month P/E ratio of 13.12X, below the industry average of 16.72X and the S&P 500’s average of 21.63X.
Image Source: Zacks Investment Research
The stock also trades at a discount to its peers, including Abercrombie & Fitch (ANF - Free Report) , Boot Barn (BOOT - Free Report) and Deckers Outdoor (DECK - Free Report) , which are trading at forward 12-month P/E multiples of 17.81X, 24.84X and 28.99X, respectively.
How to Play the Stock?
Gap continues to hold a market niche in the retail apparel industry by emphasizing brand strength, digital transformation, sustainability, global expansion, product innovation, operational efficiency, strong leadership and a consumer-centric approach. These initiatives position the company to effectively navigate the challenges of the modern retail landscape and emerge even stronger.
The company's robust fundamentals highlight its strong financial health and operational efficiency. The recent rebound in its share price, combined with a relatively low valuation than peers, offers an attractive opportunity for investors looking to invest in this profitable apparel retailer. For current shareholders, holding onto the stock promises solid long-term potential.
Image: Bigstock
Gap (GPS) Jumps 11% in a Month: Is it an Ideal Time to Buy?
The Gap Inc. stock has regained some of its lost sheen in the past month. The comeback has mainly been driven by a financial recovery, fueled by rising market share and a stronger brand presence. The company has expanded its market share for five straight quarters. Additionally, it has been reinforcing its brand relevance through a savvy reinvigoration strategy.
In the past month, the company’s shares have rallied as much as 11.5%, surpassing the industry peers and the broader S&P 500 index’s rise of 2.6% and 0.4%, respectively. The company also outperformed the broader Zacks Retail-Wholesale sector's growth of 1% in the same period.
At the current price, the stock trades at a 19.7% discount to its 52-week high of $30.59 reached on Jun 3, 2024, when it reported strong first-quarter fiscal 2024 numbers. The company’s better-than-expected first-quarter fiscal 2024 performance demonstrates a comeback on the financial front.
Image Source: Zacks Investment Research
Additionally, GPS is trading above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. This technical strength reflects positive market perception and confidence in GPS’s financial health and prospects.
Gap Stock Trades Above 50 and 200-Day Moving Average
Image Source: Zacks Investment Research
Strategies Support Gap’s Rally
The stock’s upward trajectory is well-supported by its ability to tap favorable trends in the fashion industry, digital endeavors and robust strategies. The company has carved out a niche with its four distinct brands — Gap, Old Navy, Banana Republic and Athleta — each catering to different market segments and providing diverse revenue streams. Its recent turnaround also underscores the resilience of its business model and effective cost-management strategies.
Gap is poised to strategically position itself for sustained growth, with management focused on curating trend-right merchandise, strengthening customer relationships through marketing, advancing its digital commerce agenda and efficiently managing costs. By leveraging its rich retail heritage and a portfolio of iconic brands, the company has undertaken multiple initiatives to ensure long-term success in a rapidly evolving retail landscape.
Old Navy’s emphasis on value-driven fashion and Athleta’s strong position in the thriving activewear market present significant growth opportunities. Old Navy continues to be a powerhouse brand, accounting for more than half of the company’s sales. Also, Athleta has immense potential to tap into the growing demand among women in athletics.
The company is also making strides in repositioning Banana Republic to excel in the premium lifestyle segment. Meanwhile, management has received praise for revitalizing the Gap brand, reviving its legacy of offering merchandise that appeals to "every generation."
Gap’s aggressive cost-management efforts, including streamlining its operating model with reduced airfreight and promotional activities, have been yielding positive results. The company has maintained a disciplined approach to margin expansion, expense and inventory management, and preserving a strong balance sheet, leading to significantly improved operating profit and cash flow in the first quarter of fiscal 2024. Operating income improved significantly, rising to $205 million from a loss of $10 million in the previous-year quarter.
Upward Estimate Trajectory for GPS
The Zacks Consensus Estimate for Gap’s fiscal 2024 and 2025 earnings per share rose 1.7% and 2.1%, respectively, in the last 30 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
Image Source: Zacks Investment Research
For fiscal 2024, the Zacks Consensus Estimate for GPS’s sales and EPS implies 0.2% and 24.5% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 1.9% and 8.8% year-over-year growth, respectively.
Gap Stock Undervalued
The company is currently trading at a discount to its industry on a forward 12-month P/E basis, making the stock an attractive pick for investors. Gap is currently trading at a forward 12-month P/E ratio of 13.12X, below the industry average of 16.72X and the S&P 500’s average of 21.63X.
Image Source: Zacks Investment Research
The stock also trades at a discount to its peers, including Abercrombie & Fitch (ANF - Free Report) , Boot Barn (BOOT - Free Report) and Deckers Outdoor (DECK - Free Report) , which are trading at forward 12-month P/E multiples of 17.81X, 24.84X and 28.99X, respectively.
How to Play the Stock?
Gap continues to hold a market niche in the retail apparel industry by emphasizing brand strength, digital transformation, sustainability, global expansion, product innovation, operational efficiency, strong leadership and a consumer-centric approach. These initiatives position the company to effectively navigate the challenges of the modern retail landscape and emerge even stronger.
The company's robust fundamentals highlight its strong financial health and operational efficiency. The recent rebound in its share price, combined with a relatively low valuation than peers, offers an attractive opportunity for investors looking to invest in this profitable apparel retailer. For current shareholders, holding onto the stock promises solid long-term potential.
Gap currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.