Wall Street’s outlook on Gap compared to its peers
Gap (GPS) is covered by 25 Wall Street analysts, who jointly rate the stock a 3 on a scale of 1 for “strong buy” to 5 for “sell.” The company is among the lower rated apparel stocks. In comparison, PVH (PVH), VF Corporation (VFC), and Hanesbrands (HBI) are rated 1.9, 2.5, and 2.4, respectively.
Eighty percent of the analysts covering Gap are recommending a “hold” for the stock. They include Oppenheimer, Credit Suisse, and JPMorgan.
Gap was downgraded by KeyBanc Capital Markets from “overweight” to “sector weight” on February 20 after Gap brand’s chief executive officer Jeff Kirwan parted ways with the company.
“A change to Gap banner underscores structural weakness at the brand,” said analyst Edward Yruma in a client note. He added, “We do have some concerns that issues (product, brand perception, store fleet) with Gap banner may be difficult to fix.”
Eight percent of the remaining analysts, including Barclays, are suggesting a “buy” for Gap stock, while 12% of the analysts are recommending a “sell.”
Gap has the lowest percentage of “buy” ratings among the major apparel companies. In comparison, PVH, VFC, and HBI have “buy” recommendations from 88%, 50%, and 50% of analysts, respectively.
Gap is currently trading at $32.37, which is 10% below its 52-week high. The company has been assigned an average target price of $31.49, which indicates a downside of about 3% over the next 12 months.
In comparison, PVH, VFC, and HBI have better upside potentials. The stock prices of these companies are expected to increase 8%, 8%, and 17%, respectively, over the next 12 months.
Investors seeking to add exposure to Gap can consider the iShares Edge MSCI Multifactor Consumer Discretionary ETF (CNDF), which invests 2.2% of its portfolio in Gap.