Gap Inc, the Consumer Cyclical sector company, was revisited by a Wall Street analyst today. Analyst Paul Lejuez from Citi downgraded the rating on the stock to a Hold and gave it a $22.00 price target.
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Paul Lejuez has given his Hold rating due to a combination of factors affecting Gap Inc. The analyst anticipates a stronger-than-expected performance in the second quarter, driven by slightly improved sales and gross margins. However, the impact of higher tariffs and the company’s limited pricing power are expected to exert pressure on gross margins in the latter half of the fiscal year and into the next. This creates a balanced risk/reward scenario for investors.
Additionally, the specialty retail sector, including Gap, faces challenges in offsetting tariff pressures due to historically weak pricing power. The uncertainty surrounding tariffs from countries like India and the increased rates from others such as Vietnam and Indonesia add to the cautious outlook. Consequently, despite solid topline trends, the lack of visibility into gross margin improvements makes it difficult to foresee significant earnings per share upside, prompting a Hold rating.
In another report released yesterday, Bank of America Securities also maintained a Hold rating on the stock with a $21.00 price target.