On Friday, TD Cowen maintained a Buy rating on shares of Gap (NYSE: GAP), with a price target set at $30.00. The apparel retailer's recent performance surpassed expectations, despite facing a -1% impact on sales due to hurricane-related store closures and unseasonably warm weather that affected its Kids & Baby line at Old Navy.
Gap's resilience is partly attributed to strong brand momentum and a positive turnaround at its Athleta brand. Additionally, Gap has been recognized for its effective inventory management strategies. In light of these factors, the company has revised its fiscal year 2024 sales guidance upward, indicating a potentially stronger fourth quarter in 2024 compared to Wall Street's forecasts.
The analyst's statement highlighted the company's ability to deliver commendable results under challenging circumstances and expressed confidence in Gap's ongoing strategies. The maintained price target of $30 reflects this optimism about the retailer's future performance.
Gap's stock maintains its Buy rating as the company navigates through the retail landscape, balancing external challenges with internal initiatives aimed at driving growth. The company's upward revision of its FY24 sales guidance provides a positive outlook for its fourth-quarter performance relative to market expectations.
In other recent news, Gap Inc (NYSE:GAP). has been the focus of numerous analysts following its robust quarterly performance. The company surpassed revenue expectations with a 1.6% increase, outperforming the industry, which saw a 1.5% decline. Evercore ISI increased its price target for Gap from $32.00 to $33.00, maintaining an Outperform rating. This positive assessment was echoed by other firms such as JPMorgan, TD Cowen, and Citi, which also maintained positive ratings for Gap.
Gap's third-quarter earnings report exceeded Wall Street's expectations, with an adjusted earnings per share (EPS) of $0.72, 24% higher than the projected $0.58. This was primarily due to stronger-than-anticipated results across all metrics. The company's net sales saw a year-over-year increase of 1.6%, exceeding the predicted 1.2% rise. Furthermore, Gap's gross margin expanded by 140 basis points year-over-year, reaching 42.7%.
Gap's full-year 2024 net sales forecast has been revised to a range of 1.5% to 2.0% growth, an improvement from the previous guidance. The company also expects a greater gross margin expansion of approximately 220 basis points year-over-year. Gap's full-year 2024 EPS is estimated to be approximately $2.00, above the Street's forecast of $1.88.
In terms of other company news, Gap has amended the vesting terms for its performance-based restricted stock units for fiscal years 2024-2026. This move aims to align more closely with the performance period, providing immediate vesting upon performance certification. Additionally, Gap Inc. has adopted a Senior Executive Severance Plan set to take effect in 2024.
InvestingPro Insights
Gap's recent performance and TD Cowen's maintained Buy rating are further supported by real-time data and insights from InvestingPro. The company's market cap stands at $8.29 billion, with a P/E ratio of 10.67, indicating a potentially undervalued stock relative to its earnings. This aligns with the analyst's optimistic price target of $30.
InvestingPro Tips highlight Gap's financial stability and growth potential. The company has maintained dividend payments for 49 consecutive years, demonstrating a strong commitment to shareholder returns. This is particularly noteworthy given the challenges faced in the retail sector. Additionally, Gap's liquid assets exceed short-term obligations, providing financial flexibility to navigate market fluctuations and invest in growth initiatives.
The company's revenue for the last twelve months as of Q2 2025 was $15.17 billion, with a modest growth of 0.44%. While this growth rate is modest, it's important to note that Gap has managed to remain profitable over the last twelve months, as indicated by another InvestingPro Tip. This profitability, combined with the analyst's positive outlook, suggests that Gap's strategies for inventory management and brand momentum are yielding results.
For investors seeking more comprehensive analysis, InvestingPro offers 6 additional tips for Gap, providing a deeper understanding of the company's financial health and market position.
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