Gap stock price target lowered to $24 at Telsey on tariff pressures

Investing.com - Telsey Advisory Group has lowered its price target on Gap, Inc. (NYSE:GAP) to $24.00 from $26.00 while maintaining a Market Perform rating on the stock. According to InvestingPro data, Gap maintains strong financial health with a current ratio of 1.68, indicating solid liquidity position. The stock has shown significant volatility, with its price ranging between $16.99 and $29.29 over the past 52 weeks.

The firm cited tariff pressures as a key factor in its decision, noting that tariffs will weigh on the retailer’s margin by approximately 200 basis points in both the third and fourth quarters of fiscal year 2025. Despite mitigation strategies, Telsey expects a net impact of 100 to 110 basis points on operating margin for the full fiscal year. InvestingPro analysis shows Gap maintains a healthy gross profit margin of 41.09% and has consistently paid dividends for 50 consecutive years.

Gap’s second-quarter results showed positive comparable sales across Gap and Old Navy brands as they continue to execute their brand strategies. Banana Republic posted a 4% comparable sales increase amid its ongoing turnaround efforts, while Athleta remains "a work-in-progress" according to the research note.

The retailer’s second-quarter earnings per share beat was primarily driven by a timing shift of SG&A spend out of Q2 and into Q3 and Q4, rather than fundamental outperformance. Gross margin faced more pressure than expected during the quarter.

Telsey’s new $24 price target assumes a 10.7x multiple on its two-year forward earnings per share estimate, compared to the one-year next-twelve-months median multiple of 10.4x, reflecting continued uncertainty in the macro environment and challenging visibility to longer-term profitability across Gap’s brand portfolio.

In other recent news, Gap Inc. reported its second-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $0.57, compared to the forecasted $0.55. The company’s revenue aligned with estimates, reaching $3.73 billion. These developments come amid a broader context of financial reporting and analysis. Despite the earnings beat, there was a noted decline in Gap’s stock during regular trading hours. However, the stock experienced a slight increase in aftermarket trading. This earnings report highlights the company’s ability to exceed profit expectations while maintaining projected revenue levels. The financial community closely monitors such results as they provide insight into the company’s performance. Analysts’ projections play a significant role in shaping investor expectations and market reactions.

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