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Gap Stock Surges after 4Q17 Earnings Beat

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Gap’s stock market performance

Gap’s (GPS) impressive 4Q17 results and robust guidance were well received by investors. Following its earnings release on February 28, the company’s stock price surged 7.8% on March 1.

The company is now sitting at a slight YTD (year-to-date) profit of 0.1%. It is trading ~5% below its 52-week high. Gap was among the top apparel stocks of 2017 and rose 52% during the year.

The stock was, however, impacted by the departure of Gap brand CEO Jeff Kirwan in mid-February. The company was downgraded by KeyBanc Capital Markets from “overweight” to “sector weight” on February 20 after Kirwan’s departure.

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Analysts’ post-4Q17 views on Gap

There were no changes in recommendations for Gap after its 4Q17 earnings release. However, several brokerage houses raised their price targets for the stock:

  • Instinet, from $31 to $33
  • Deutsche Bank, from $32 to 34
  • BMO Capital Markets, from $29 to $35
  • JPMorgan Chase, from $28 to $32
  • Jefferies, from $45 to $48

Gap currently has an average target price of $33.94, indicating a marginal downside of 0.5%.

Wall Street recommendations

Gap is covered by 25 Wall Street analysts, who jointly rate the stock a 3.0 on a scale of 1 (strong buy) to 5 (sell). The company has a lower rating than PVH (PVH), VF (VFC), and Hanesbrands (HBI), which have ratings of 1.9, 2.5, and 2.4, respectively.

Of the 25 analysts covering Gap, ~80% (including Oppenheimer, Credit Suisse, and JPMorgan Chase) recommend “hold,” 8% (including Barclays) recommend “buy,” and 12% recommend “sell.” Investors seeking exposure to Gap could consider the iShares Edge MSCI Multifactor Consumer Discretionary ETF (CNDF), which invests 2.3% of its portfolio in the company.

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