Positive Outlook for Gap Inc: Buy Rating Supported by Core Brand Growth and Margin Recovery Potential

In a report released today, Jonna Kim from TD Cowen maintained a Buy rating on Gap Inc, with a price target of $29.00.

Jonna Kim has given her Buy rating due to a combination of factors that highlight the potential for Gap Inc’s growth and recovery. Despite the limited upside in the second quarter earnings per share, primarily due to Athleta’s impact on sales and margins, the overall tariff impact was less severe than anticipated. Management’s expectation of no further operating income declines from tariffs in the upcoming fiscal year is a positive indicator.
Moreover, the consistent performance of Old Navy and Gap, along with encouraging quarter-to-date trends and anticipated increases in average unit retail prices, contribute to a positive outlook. Excluding Athleta, the core brands demonstrated solid comparable growth, and early back-to-school trends are promising. The expected sequential acceleration in comparable sales growth, driven by marketing efforts and a focus on denim, further supports the Buy rating. While the timing of Athleta’s turnaround remains uncertain, the ongoing momentum of the core brands and potential margin recovery in the next fiscal year reinforce the positive recommendation.

In another report released today, TR | OpenAI – 4o also reiterated a Buy rating on the stock with a $25.00 price target.