Gap stock holds as BMO affirms market perform rating

On Friday, BMO Capital Markets maintained its "Market Perform" rating and a $25.00 price target for Gap Inc. (NYSE:GAP) shares, above the current trading price of $19.48. According to InvestingPro data, the stock has fallen nearly 14% in the past week and is trading near its 52-week low. The decision came after Gap reported a solid earnings beat for the fourth quarter and provided an EBIT (Earnings Before Interest and Taxes) growth forecast for FY25 that surpassed market expectations.

Gap’s recent financial results showed sales, gross margin, and SG&A (Selling, General, and Administrative Expenses) all outperforming consensus estimates, with the exception of its Athleta brand, which did not meet expectations. Management highlighted ongoing market share gains and projected an 8-10% increase in EBIT for FY25.

The company’s merchandise margin saw a slight rise of 20 basis points, the smallest increase since the third quarter of 2022, and year-over-year inventory levels were up for the first time since then. BMO Capital noted Gap’s growing cash reserves and strong balance sheet, despite higher capital expenditures, describing it as a "burgeoning war-chest."

The analyst at BMO Capital expressed a positive view on Gap’s share gains and profit improvements but suggested that the current share price already reflects these positive developments. The firm’s stance remains unchanged with the maintained $25 price target.

In other recent news, Gap Inc. reported impressive first-quarter 2025 earnings, with earnings per share (EPS) of $0.54, significantly surpassing the forecasted $0.36. The company’s revenue also exceeded expectations, reaching $4.1 billion compared to the anticipated $4.07 billion. In addition to strong earnings, Gap’s strategic focus on brand reinvigoration and market share expansion contributed to a year-over-year net sales increase of 1%, totaling $15.1 billion. The company’s gross margin expanded by 250 basis points to 41.3%, and operating income rose by 83% to $1.1 billion.

Evercore ISI recently revised its price target for Gap shares to $30.00, down from $33.00, while maintaining an Outperform rating. This adjustment follows Gap’s robust fourth-quarter performance, where earnings per share reached $0.54, surpassing expectations. Notably, Old Navy and the Gap chain experienced significant same-store sales growth of 3% and 7%, respectively, placing them among the top-performing retail stories during the holiday season. Despite the positive results, the company plans to continue its focus on cost management, aiming to save $150 million, while projecting net sales growth of 1-2% for 2025. These developments reflect confidence in Gap’s strategic direction and its ability to navigate a dynamic retail environment.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.