Gap Inc (GAP) AI Stock Analysis

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Gap Inc

(NYSE:GAP)

73Outperform

Gap Inc.'s stock is supported by a strong financial foundation and attractive valuation, indicating potential for future growth. The positive sentiment from the recent earnings call and the company's ability to navigate competitive pressures add to its appeal. However, technical indicators suggest caution with bearish momentum. Overall, the stock presents a compelling opportunity for value-oriented investors, despite some short-term technical weaknesses.

Positive Factors

Brand Strategy

Accelerating comp momentum indicates that GAP’s brand reinvigoration strategy is working.

Earnings

GAP reported a strong F4Q beat and provided healthy initial FY25 guidance.

Financial Performance

GAP's strong 4Q24 EPS with notable comp growth at Gap and Old Navy led to a positive stock reaction.

Negative Factors

Brand Performance

Athleta was the only pain point of the quarter, with comp -2% as the brand saw holiday underperformance from their core customer.

Macro Environment

Despite an uncertain macro, Old Navy comp beat the Street (+3% vs. 0.7%), as Gap share gains were led by growth in the lower-income cohort at Old Navy.

Weather Impact

Weather disruptions led to softer demand in early February, affecting sales performance.

Gap Inc (GAP) vs. S&P 500 (SPY)

Market Cap

$7.20B

Dividend Yield3.14%

Average Volume (3M)12.32M

Price to Earnings (P/E)8.7

Beta (1Y)1.17

Revenue Growth1.32%

EPS Growth65.83%

CountryUS

Employees82,000

SectorConsumer Cyclical

Sector Strength58

IndustryApparel - Retail

Share Statistics

EPS (TTM)2.20

Shares Outstanding376,603,730

10 Day Avg. Volume12,408,300

30 Day Avg. Volume12,323,193

Financial Highlights & Ratios

PEG Ratio0.13

Price to Book (P/B)N/A

Price to Sales (P/S)0.50

Price to Cash Flow (P/CF)3.10

P/FCF Ratio3.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$27.57

Price Target Upside44.12% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering14

Gap Inc Business Overview & Revenue Model

Company DescriptionGap Inc. is a leading global retailer offering clothing, accessories, and personal care products for men, women, and children. Founded in 1969 and headquartered in San Francisco, California, the company operates a diverse portfolio of brands, including Gap, Old Navy, Banana Republic, Athleta, and Intermix. With a focus on delivering modern, stylish, and affordable apparel, Gap Inc. serves customers through a combination of company-operated stores, franchise stores, and e-commerce websites across numerous international markets.

How the Company Makes MoneyGap Inc. generates revenue primarily through the sale of apparel, accessories, and personal care products under its various brand names. Its business model is centered around direct-to-consumer sales via both physical retail locations and online platforms. The company's key revenue streams include sales from its owned retail stores, e-commerce operations, and franchised locations. Additionally, Gap Inc. benefits from strategic partnerships and collaborations that expand its market reach and appeal, as well as its loyalty programs that enhance customer engagement and retention. Seasonal promotions, marketing campaigns, and a focus on trend-responsive product lines also contribute significantly to its earnings.

Gap Inc Financial Statement Overview

Summary

Gap Inc. exhibits a solid financial foundation characterized by improved profitability, efficient cash flow generation, and a moderate leverage profile. While revenue growth is steady, the company has successfully enhanced its margins and return on equity. The balance sheet and cash flow statements reflect prudent financial management, positioning the company well to navigate competitive pressures in the retail industry.

Income Statement

Positive

Gap Inc. demonstrated strong improvements in profitability with a gross profit margin of 49.59% and a net profit margin of 5.59% for the latest fiscal year. The EBIT margin rose to 7.37%, highlighting improved operational efficiency. Revenue grew by 1.32% year-over-year, indicating modest growth in a competitive retail environment. The EBITDA margin of 10.71% showcases solid earnings before interest, taxes, depreciation, and amortization. These figures suggest a positive trajectory compared to previous years, though the revenue growth remains conservative.

Balance Sheet

Positive

The balance sheet reflects a solid equity position with a debt-to-equity ratio of 1.68, indicating moderate leverage. The return on equity improved to 25.86%, underscoring efficient use of equity to generate profits. However, the equity ratio of 27.47% suggests that a significant portion of assets is financed by debt, which could pose risks if market conditions worsen. Overall, the balance sheet demonstrates balanced financial management with a focus on maintaining equity strength while leveraging debt cautiously.

Cash Flow

Positive

Gap Inc. showed robust cash flow metrics with a free cash flow to net income ratio of 1.23, reflecting effective conversion of earnings into cash. The operating cash flow to net income ratio of 1.76 further emphasizes strong cash generation capabilities. Despite a slight decline in free cash flow growth, the company's ability to generate substantial free cash flow supports its operational and strategic initiatives. The cash flow statements indicate healthy liquidity and financial flexibility.

Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
15.09B	14.89B	15.62B	16.67B	13.80B
	Gross Profit
7.48B	5.78B	5.36B	6.64B	4.71B
	EBIT
1.11B	622.00M	-69.00M	1.14B	-862.00M
	EBITDA
1.61B	1.17B	489.43M	994.00M	-403.00M
	Net Income Common Stockholders
844.00M	502.00M	-202.00M	256.00M	-665.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.59B	1.87B	1.22B	877.00M	2.40B
	Total Assets
11.88B	11.04B	11.39B	12.76B	13.77B
	Total Debt
5.47B	5.44B	6.02B	6.25B	7.66B
	Net Debt
3.14B	3.57B	4.80B	5.37B	5.68B
	Total Liabilities
8.62B	8.45B	9.15B	10.04B	11.15B
	Stockholders Equity
3.26B	2.60B	2.23B	2.72B	2.61B
Cash Flow		Free Cash Flow
1.04B	1.11B	-78.00M	115.00M	-155.00M
	Operating Cash Flow
1.49B	1.53B	607.00M	809.00M	237.00M
	Investing Cash Flow
-692.00M	-334.00M	-227.00M	-446.00M	-510.00M
	Financing Cash Flow
-321.00M	-567.00M	6.00M	-1.47B	895.00M

Gap Inc Technical Analysis

Technical Analysis Sentiment

Negative

Last Price19.13

Price Trends

50DMA

20.85

Negative

100DMA

22.38

Negative

200DMA

21.93

Negative

Market Momentum

MACD

-0.64

Positive

RSI

47.12

Neutral

STOCH

42.60

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GAP, the sentiment is Negative. The current price of 19.13 is below the 20-day moving average (MA) of 19.73, below the 50-day MA of 20.85, and below the 200-day MA of 21.93, indicating a bearish trend. The MACD of -0.64 indicates Positive momentum. The RSI at 47.12 is Neutral, neither overbought nor oversold. The STOCH value of 42.60 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GAP.

Gap Inc Risk Analysis

Gap Inc disclosed 30 risk factors in its most recent earnings report. Gap Inc reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Gap Inc Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
URBN	79 Outperform	$4.58B	11.60	17.56%	―	7.71%	40.01%
GAP	73 Outperform	$7.20B	8.70	28.81%	3.14%	1.32%	65.83%
AEO	70 Outperform	$1.85B	6.40	18.80%	4.66%	1.27%	96.32%
BKE	69 Neutral	$1.77B	8.91	46.71%	4.04%	-3.44%	-11.74%
ANF	63 Neutral	$3.57B	6.82	47.77%	―	15.60%	71.45%
Sector *	60 Neutral	$6.54B	11.34	3.27%	4.27%	2.37%	-20.86%
FL	55 Neutral	$1.13B	96.91	0.62%	―	-2.20%	―

* Consumer Cyclical Sector Average

Performance Comparison

GAP

Gap Inc

19.13

-1.02

-5.06%

ANF

Abercrombie Fitch

72.98

-41.86

-36.45%

AEO

American Eagle

10.74

-11.08

-50.78%

BKE

Buckle

34.61

0.89

2.64%

Foot Locker

11.90

-9.66

-44.81%

URBN

Urban Outfitters

49.48

10.92

28.32%

Gap Inc Earnings Call Summary

Earnings Call Date: Mar 6, 2025 | % Change Since: -0.88% | Next Earnings Date: May 22, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong and positive overall sentiment, with significant financial achievements and market share gains across all brands, despite some challenges faced by the Athleta brand and impacts from the 53rd week loss.

Highlights

Record-Breaking Year-End Results

The Gap, Inc. delivered positive comps in all four quarters of 2024, with all brands comping flat to positive for the year. The company achieved one of its highest gross margins in the last 20 years, increased operating income by over $500 million, and achieved the highest EPS since 2018 at $2.20.

Market Share Gains Across All Brands

The Gap, Inc. gained market share for the eighth consecutive quarter, led by Old Navy's leadership as the number one specialty power brand and retailer in the US. Gap brand accelerated to 7% comps, marking its fifth consecutive quarter of positive comps.

Strong Financial Position

The company ended the year with $2.6 billion in cash and generated $1 billion in free cash flow, allowing for a strong balance sheet and the ability to invest in growth opportunities.

Operational and Financial Rigor

The company expanded operating margin by 330 basis points compared to last year's adjusted margins, demonstrating significant progress in cost structure management and financial discipline.

Brand Reinvigoration Success

Old Navy delivered one of its highest annual net sales in history, and Banana Republic saw notable improvement with a 4% comp increase. Both brands showed signs of sustained growth and market relevance.

Lowlights

Challenges with Athleta Brand

Athleta struggled with a negative 2% comp in the fourth quarter and did not meet expectations for customer engagement during peak holiday shopping moments, indicating a need for brand reinvigoration and improvement.

Impact of 53rd Week Loss

Net sales for the fourth quarter decreased by 3% year over year, impacted by the 7 percentage point negative effect related to the loss of the 53rd week.

Company Guidance

During the fourth quarter of fiscal year 2024, The Gap, Inc. delivered impressive financial results, with comparable sales up 3% across the portfolio, marking the fourth consecutive quarter of positive comps. Old Navy, the largest brand, also reported a 3% increase in comparable sales and achieved its eighth consecutive quarter of market share gains. The Gap brand saw a 7% rise in comps, marking its fifth consecutive quarter of positive performance, while Banana Republic achieved a 4% increase. However, Athleta faced challenges with a 2% decline in comps. The company enhanced its gross margin by 250 basis points year-over-year to 38.9% and expanded its operating margin by 330 basis points to 7.4% for the full year, with operating income growing by over $500 million. Earnings per share reached $2.20, the highest since 2018, and the company ended the year with strong cash balances of approximately $2.6 billion and generated $1 billion in free cash flow. Looking ahead, The Gap, Inc. expects net sales to grow by 1-2% in fiscal 2025, with continued gross margin expansion and SG&A leverage, aiming for 8-10% growth in operating income.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.