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Friday saw a revision in the price target for Gap Inc. (NYSE:GAP) shares by Evercore ISI, now set at $30.00, down from the previous target of $33.00. Despite this adjustment, the firm maintains an Outperform rating on the retailer’s stock. The decision comes after Gap reported a robust fourth-quarter performance, with earnings per share (EPS) reaching $0.54, surpassing both Wall Street and Evercore ISI’s expectations of $0.38. According to InvestingPro data, Gap maintains strong fundamentals with a market capitalization of $7.35 billion and a healthy gross margin of 41.28%. The company’s stock has recently experienced significant pressure, with a 13.84% decline over the past week.
Gap’s positive results were attributed to strong sales across its brands, with the exception of Athleta. The company’s guidance for 2025 also exceeded analysts’ forecasts, and its projections for the first quarter of the year are roughly in line with current EPS expectations, despite a general industry slowdown in February. Notably, Old Navy experienced a 3% same-store sales (SSS) growth in the fourth quarter, and the Gap chain itself saw a significant 7% increase, placing it among the top-performing retail stories during the holiday season, alongside Ralph Lauren (NYSE:RL) North America, Coach (NYSE:TPR) North America, and Burlington (NYSE:BURL). The company’s total revenue reached $15.09 billion in the last twelve months, with a solid current ratio of 1.6, indicating strong liquidity position.
The analyst noted that multiple brands within Gap’s portfolio are contributing to its success. The guidance for 2025 appears conservative, with minimal rent occupancy depreciation (ROD) expansion despite a flat to slightly positive SSS leverage point. Additionally, selling, general, and administrative expenses (SG&A) are expected to grow year-over-year, despite the company’s plans to save $150 million in costs. Gap’s net cash position is at its highest since 2011, and post-market trading valuations put the stock at a price-to-earnings (P/E) ratio of 9.6 times against the high end of the 2025 EPS range. The analyst reiterated the Outperform rating, reflecting confidence in the company’s performance and strategic direction.
In other recent news, Gap Inc. reported first-quarter 2025 earnings that exceeded analysts’ expectations, with an earnings per share (EPS) of $0.54 compared to the projected $0.36. The company also reported revenue of $4.1 billion, surpassing the anticipated $4.07 billion. This marks a continuation of Gap’s trend of outperforming market expectations. The company’s gross margin expanded by 250 basis points to 41.3%, and operating income rose by 83% to $1.1 billion. Gap Inc. has gained market share for eight consecutive quarters, with online sales accounting for 38% of total net sales. Analysts from firms such as Morgan Stanley (NYSE:MS) and JPMorgan have noted the company’s strong performance, with particular emphasis on the Gap brand’s significant comp growth and market share gains. The company projects net sales growth of 1-2% for 2025, with an expected operating income growth of 8-10%. Gap Inc. maintains a strong cash balance of $2.6 billion, up 38% from the previous year, and plans to continue investing in technology and store optimization.
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