Gap downgraded to Equal Weight from Overweight at Wells Fargo

Wells Fargo downgraded Gap (GAP) to Equal Weight from Overweight with a price target of $24, down from $30. The firm adjusted ratings in retail cut 2026 earnings estimates well below the Street to reflect current tariff headwinds and assumptions for a mild recession. Both headwinds will begin impacting numbers in the second half of 2025, the analyst tells investors in a research note. Wells sees a tougher setup ahead for Gap. Following two years of significant operating margin expansion as new management has reigned in costs, balanced inventory, and lowered promotionality, further merchandise margin and cost leverage opportunities in this environment will be limited, contends the firm.