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Investing.com - BofA Securities has lowered its price target on The Gap Inc (NYSE:GAP). (NYSE:GPS) to $21.00 from $25.00 while maintaining a Neutral rating on the stock. According to InvestingPro data, Gap currently trades at an EV/EBITDA of -7.05x and maintains a "GOOD" Financial Health Score, with earnings results expected in 2 days.
The price target reduction reflects BofA’s concerns about tariff pressure, particularly on Gap’s lower-end concepts like Old Navy, which have limited pricing power and serve consumers who are more sensitive to inflation.
BofA analyst Lorraine Hutchinson cut earnings estimates by 2% and 17% to reflect a blended 21% tariff rate, though the firm acknowledged positive comparable sales momentum at both Old Navy and Gap brands.
The new $21 price target represents 5x 2026 estimated EV/EBITDA on BofA’s lowered estimates, down from the previous target of $25.
BofA noted that even after factoring in the earnings reduction, Gap stock currently trades at 4.5x EV/EBITDA, which the firm considers a fair valuation for a retailer showing positive sales momentum but facing margin pressure.
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