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Tuesday, Evercore ISI analyst Michael Binetti reiterated an Outperform rating on Gap Inc. (NYSE:GAP) with a steady price target of $33.00, representing significant upside from the current price of $21.35. According to InvestingPro analysis, Gap appears undervalued based on its Fair Value calculations, with the stock currently trading at an attractive P/E ratio of 9.8x. Binetti highlighted the potential for Gap’s fiscal year 2025 outlook to be understated, suggesting that near-term guidance may be conservative due to temporary factors such as weather impacting Old Navy (ON) and Athleta sales.
Binetti’s analysis anticipates that Gap’s core business is gaining momentum from improved product offerings and marketing strategies. With annual revenue of $15.23 billion and a healthy gross margin of 49.6%, the company shows strong fundamental performance. He expects Old Navy to experience a significant uptick in performance once weather-related challenges subside, mirroring past trends of rapid growth during more favorable conditions. InvestingPro data reveals two key insights: the company has maintained dividend payments for 50 consecutive years, and analysts predict profitability this year.
Moreover, the analyst foresees Athleta, under the leadership of CEO Chris Blakeslee, overcoming transitory profit and loss headwinds and demonstrating the results of an 18-month brand turnaround effort. Blakeslee’s experience at Alo is seen as a key factor in driving Athleta’s anticipated acceleration. With Gap’s upcoming earnings report in just two days, investors can access comprehensive analysis and additional insights through InvestingPro’s detailed research reports, which cover over 1,400 US stocks.
Evercore ISI’s stance is that within a few months, Gap could emerge as one of the most promising same-store sales (SSS) acceleration stories within the softlines retail sector. The firm believes that multiple brands within Gap’s portfolio will contribute to positive earnings per share (EPS) revisions, bolstering the company’s financial performance.
In summary, Evercore ISI’s evaluation of Gap Inc. remains positive, with the expectation that new initiatives and leadership at Gap and its brands will lead to notable growth and an encouraging outlook for the company’s future success.
In other recent news, Gap Inc. has announced a 10% increase in its quarterly dividend for the first quarter of fiscal year 2025, reflecting confidence in its financial stability. The company reported net sales of $14.9 billion for fiscal year 2023, highlighting its ongoing commitment to shareholder value. Moody’s Ratings upgraded Gap’s corporate family rating to Ba2, citing improvements in operating performance and profitability, which were driven by better inventory management and reduced promotional activities. Argus Research has upgraded Gap’s stock to Buy, with a price target of $27, expressing optimism in the company’s turnaround efforts and consistent growth in net sales.
Baird also raised its price target for Gap to $31, maintaining a Neutral rating, and noted the company’s positive sales momentum and operational efficiencies. The firm observed that Gap’s recent history of exceeding margin expectations could lead to future performance surpassing current forecasts. Additionally, Gap’s strategic initiatives have resulted in improved operating margins, contributing to a positive outlook among analysts. Bernstein’s analysis highlighted a strong start to the holiday quarter for U.S. apparel retailers, including Gap, due to favorable weather conditions and increased spending among higher-income consumers. These developments collectively indicate a period of strategic growth and operational improvement for Gap Inc.
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