Gap stock price target lowered to $29 from $31 at TD Cowen

TD Cowen lowered its price target on Gap, Inc. (NYSE:GAP) to $29.00 from $31.00 on Monday, while maintaining a Buy rating on the apparel retailer’s stock. The company, currently valued at $7.8 billion, trades at an attractive P/E ratio of 9x, with InvestingPro analysis suggesting the stock is undervalued at current levels.

The research firm believes the market underappreciates the sustainability of Gap and Old Navy brands, while the potential turnaround of Banana Republic and Athleta could drive topline growth and margin expansion. TD Cowen also noted there could be upside for the remainder of the year if consumer spending remains stable. The company maintains a strong gross profit margin of 41.4% and has received a "GREAT" financial health score from InvestingPro.

Gap shares have fallen approximately 25% since the company’s first-quarter 2025 earnings report, which TD Cowen views as an opportunity for investors. The firm attributes the stock decline to elevated expectations ahead of the earnings announcement. This volatility is typical for Gap stock, which has a beta of 2.17, indicating higher-than-market price movements.

TD Cowen expects Gap’s improving fundamentals to lead to multiple expansion in the stock price. The research firm also sees conservatism in Gap’s fiscal year 2025 guidance, particularly regarding tariff impacts, creating potential for upside.

The firm’s earnings estimate of $2.23 per share for fiscal 2025 sits above the Wall Street consensus of $2.20, reflecting its positive outlook despite the price target reduction.

In other recent news, Gap Inc (BVMF:GPSI34). reported a strong start to fiscal year 2025, exceeding earnings and revenue expectations. The company posted earnings per share of $0.51, surpassing the forecast of $0.44, and revenue reached $3.46 billion, above the anticipated $3.41 billion. Despite these positive results, Citi analyst Paul Lejuez adjusted the price target for Gap shares from $33.00 to $30.00 but maintained a Buy rating, citing strong sales and cost management. The Gap brand saw a 5% increase in comparable sales, while Old Navy’s comparable sales rose by 3%, exceeding market expectations. However, tariffs pose a potential headwind, with an estimated $100-150 million impact on the cost of goods sold in the second half of the year. JPMorgan analysts reaffirmed their Overweight rating on Gap stock with a $29 price target, based on the company’s growth strategies and financial projections. The company’s management continues to focus on brand revitalization and digital sales growth, contributing to a 140 basis point improvement in operating margin.

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