Gap Inc. (GAP, Financial) experienced a significant decline in its stock price, dropping 15% to $23.82. This downturn came after the company released its first-quarter financial results and provided guidance for the fiscal year 2025. The market reaction indicates investor concerns over the company's future performance and strategic direction, following the latest financial disclosures.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 17 analysts, the average target price for Gap Inc (GAP, Financial) is $27.69 with a high estimate of $35.00 and a low estimate of $13.00. The average target implies an downside of 0.92% from the current price of $27.95. More detailed estimate data can be found on the Gap Inc (GAP) Forecast page.
Based on the consensus recommendation from 20 brokerage firms, Gap Inc's (GAP, Financial) average brokerage recommendation is currently 2.6, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Gap Inc (GAP, Financial) in one year is $12.76, suggesting a downside of 54.35% from the current price of $27.95. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Gap Inc (GAP) Summary page.
GAP Key Business Developments
Release Date: November 21, 2024
- Net Sales: Increased 2% to $3.8 billion.
- Comparable Sales: Up 1% overall.
- Old Navy Sales: $2.2 billion, flat comparable sales.
- Gap Brand Sales: $899 million, comparable sales up 3%.
- Banana Republic Sales: $469 million, comparable sales down 1%.
- Athleta Sales: $290 million, comparable sales up 5%.
- Gross Margin: Expanded by 140 basis points to 42.7%.
- Operating Income: $355 million, operating margin of 9.3%.
- Earnings Per Share (EPS): $0.72, up 24% from last year.
- Cash and Equivalents: $2.2 billion.
- Free Cash Flow: $540 million year to date.
- Inventory Levels: Down 2% year over year.
- Dividend: $0.15 per share, $169 million returned to shareholders year to date.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gap Inc (GAP, Financial) reported a 2% increase in net sales for the third quarter, marking the fourth consecutive quarter of sales growth.
- The company achieved a 9.3% operating margin, the highest Q3 operating margin in seven years, with a 270 basis point improvement over the previous year.
- Gap Inc (GAP) expanded its gross margin by 140 basis points, driven by better inventory management and reduced advertising costs.
- Athleta returned to growth with a 5% increase in comparable sales, marking a positive inflection point for the brand.
- The company ended the quarter with a strong cash balance of $2.2 billion and generated $540 million in free cash flow year to date.
Negative Points
- Banana Republic's comparable sales were down 1%, indicating ongoing challenges in the women's segment despite improvements in men's apparel.
- Old Navy faced weather-related headwinds, particularly impacting the kids and baby segments, which slowed sales mid-quarter.
- The company experienced hurricane-related store closures, with up to 180 stores affected at the peak of the storms.
- Gap Inc (GAP) noted that the lowest income customer segment remained flat, reflecting potential economic pressures on this demographic.
- The company anticipates a negative impact on Q4 net sales due to the loss of the 53rd week and a weekly calendar shift, estimated at approximately $300 million.
