Tuesday, Gap Inc. (NYSE:GPS) stock received a reiterated Sell rating from UBS, with a steady price target of $9.00. UBS predicts a shortfall in Gap's first-quarter earnings per share (EPS), expecting $0.07, which is $0.07 less than the market consensus.
The firm attributes this anticipated miss to heavier-than-expected markdowns by Gap in the first quarter, which could negatively impact margins despite market expectations of a sales beat.
The firm also forecasts that Gap will provide second-quarter guidance below market consensus, which could potentially turn market sentiment bearish and lead to downward revisions of the company's full-year 2024 EPS estimates. UBS's full-year 2024 EPS estimate for Gap stands at $1.30, which is $0.13 lower than the consensus.
In the lead-up to the earnings announcement, options prices suggest that Gap's stock might experience a movement of plus or minus 14.5%, a figure that stands in contrast to its historical average earnings day move of 6.5%. However, UBS anticipates less volatility than the options market implies.
The firm's perspective indicates caution regarding Gap's upcoming financial performance and the potential impact on the stock's movement post-earnings report.
InvestingPro Insights
As Gap Inc. (NYSE:GPS) prepares for its upcoming earnings announcement, investors are closely monitoring the company's performance metrics. According to InvestingPro data, Gap's market capitalization stands at $7.84 billion, with a price-to-earnings (P/E) ratio of 15.47. Notably, the company's adjusted P/E ratio for the last twelve months as of Q4 2024 is slightly lower at 14.48, suggesting a potentially more favorable valuation compared to the current P/E. Additionally, Gap's dividend yield as of April 2024 is 2.86%, reflecting a commitment to returning value to shareholders, as evidenced by its history of maintaining dividend payments for 49 consecutive years.
Investors may find encouragement in the InvestingPro data showing a 1-year price total return of 163.03%, indicating a strong performance over the past year. In light of the UBS report, two InvestingPro Tips that stand out are the company's record of raising its dividend for three consecutive years and the fact that six analysts have revised their earnings estimates upwards for the upcoming period, suggesting a potential divergence in analyst expectations. For those seeking a deeper dive into Gap's financial outlook, InvestingPro offers additional tips and a comprehensive analysis, which can be accessed with a yearly or biyearly Pro and Pro+ subscription. Use the coupon code PRONEWS24 to receive an additional 10% off. With 7 more InvestingPro Tips available, investors can gain a fuller picture of Gap's financial health and make more informed decisions.
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