Gap Stock Surges after 4Q17 Earnings Beat



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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