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Gap Inc (GAP)
NYSE:GAP
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Gap Inc
(NYSE:GAP)
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Rating:76Outperform
Price Target:
$33.00
▲(17.02% Upside)
Gap Inc. receives a strong overall stock score of 76, driven by robust financial performance and a favorable valuation. The positive earnings call and strategic board appointment further bolster confidence in the company's growth prospects. Technical indicators support a positive outlook, though challenges such as Athleta's performance and tariff impacts on margins warrant attention.
Positive Factors
Strong revenue recovery and margins
A 74.5% TTM revenue rebound with a 41% gross margin and improved net margin signals durable demand recovery and pricing power across brands. Sustainable margins and solid operating metrics support reinvestment, debt servicing and resilience through economic cycles.
Improved cash generation
A 130% rise in free cash flow demonstrates materially stronger cash conversion and internal funding capacity. Robust FCF improves liquidity, funds capex and brand initiatives, and reduces reliance on external financing, strengthening long-term operational flexibility.
Supply chain productivity gains
Near-term 30% productivity gains from automation and AI are structural improvements that lower fulfillment costs, speed delivery, and support omnichannel scale. These efficiencies can sustainably enhance margins and customer experience versus peers over multiple years.
Negative Factors
Athleta sales decline
An 11% sales decline at Athleta undermines portfolio diversification and reduces exposure to higher-margin activewear demand. Long-term brand recovery may require significant marketing, product and investment commitment, weighing on consolidated growth and margin mix until turnaround succeeds.
Tariff-driven margin pressure
A structural ~190bp tariff headwind erodes gross margins unless absorbed by price or cost cuts. Persistent trade costs reduce margin sustainability, force pricing tradeoffs with customers, and can constrain profitability during periods when passing costs to consumers is difficult.
Relatively high leverage
A debt-to-equity around 1.5 and low equity ratio indicate meaningful leverage dependence. Higher leverage increases interest and refinancing risk, limits strategic optionality for M&A or buybacks, and can pressure the business in economic slowdowns, reducing long-term financial flexibility.
Gap Inc (GAP) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$10.79B
Dividend Yield2.45%
Average Volume (3M)6.65M
Price to Earnings (P/E)13.0
Beta (1Y)1.23
Revenue Growth0.29%
EPS Growth3.65%
CountryUS
Employees82,000
SectorConsumer Cyclical
Sector Strength84
IndustryApparel - Retail
Share Statistics
EPS (TTM)0.62
Shares Outstanding371,921,750
10 Day Avg. Volume6,865,768
30 Day Avg. Volume6,649,230
Financial Highlights & Ratios
PEG Ratio0.17
Price to Book (P/B)2.77
Price to Sales (P/S)0.60
P/FCF Ratio8.71
Enterprise Value/Market Cap1.27
Enterprise Value/Revenue0.90
Enterprise Value/Gross Profit2.19
Enterprise Value/Ebitda8.00
Forecast
1Y Price Target
$31.29Price Target Upside10.96% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering15
EPS Forecast (FY)2.32
Revenue Forecast (FY)$15.76B
Gap Inc Business Overview & Revenue Model
Company DescriptionThe Gap, Inc. operates as an apparel retail company. The company offers apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. Its products include denim, tees, fleece, and khakis; eyewear, jewelry, shoes, handbags, and fragrances; and fitness and lifestyle products for use in yoga, training, sports, travel, and everyday activities for women and girls. The company offers its products through company-operated stores, franchise stores, Websites, third-party arrangements, and catalogs. It has franchise agreements with unaffiliated franchisees to operate Old Navy, Gap, Athleta, and Banana Republic stores and websites in Asia, Europe, Latin America, the Middle East, and Africa. As of December 31, 2021, the company had 2,835 company-operated stores and 564 franchise stores. It also provides its products through e-commerce sites. The Gap, Inc. was incorporated in 1969 and is headquartered in San Francisco, California.
How the Company Makes MoneyGap Inc. generates revenue primarily through the sale of its clothing and accessories across its various brands. The company operates a multi-channel retail model, which includes physical stores, e-commerce websites, and mobile applications, allowing it to reach a broad customer base. Key revenue streams include direct sales from retail locations, online sales, and wholesale partnerships with other retailers. Additionally, Gap Inc. benefits from seasonal promotions, loyalty programs, and collaborations with other brands, which drive customer engagement and enhance sales. The company's strategic focus on inventory management, marketing initiatives, and customer experiences also contribute to its overall earnings.
Gap Inc Earnings Call Summary
Earnings Call Date:Nov 20, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Mar 05, 2026
Earnings Call Sentiment Positive
The earnings call revealed a strong overall performance by The Gap, Inc., highlighted by significant growth in comparable sales, successful brand strategies at Old Navy and Gap, and technological advancements in their supply chain. However, challenges persist with Athleta's declining sales and the impact of tariffs on margins. Despite these challenges, the company has raised its fiscal year outlook, indicating confidence in continued growth.Q3-2025 Updates
Positive Updates
Strong Comparable Sales Growth
The Gap, Inc. reported a 5% increase in comparable sales, the highest quarterly comp in over four years. This growth was driven by strong performances from Old Navy, Gap, and Banana Republic.
Operating Margin and Cash Position
The company delivered an operating margin of 8.5%, benefiting from growth in Average Unit Retail (AUR). They ended the quarter with strong cash balances of approximately $2.5 billion.
Old Navy and Gap Brand Success
Old Navy's comparable sales were up 6%, with the brand gaining market share and showing strong performance in categories like denim and activewear. Gap's comparable sales increased by 7%, marking the eighth consecutive quarter of positive comps, driven by successful campaigns like 'Better in Denim.'
Supply Chain and Technological Advancements
The company introduced new automation and AI capabilities across its fulfillment network, increasing productivity by nearly 30% compared to previous years.
Updated Fiscal Year Outlook
The company raised its full-year 2025 net sales growth to the high end of its prior range and increased its operating margin outlook.
Negative Updates
Athleta's Performance Challenges
Athleta's net sales decreased by 11% year over year, with comparable sales also down 11%. The brand is in the early stages of a reinvigoration journey.
Impact of Tariffs on Margins
The gross margin of 42.4% declined by 30 basis points due to an estimated 190 basis point impact from tariffs.
Banana Republic Sales Decline
Net sales for Banana Republic were down 1% year over year, despite a 4% increase in comparable sales.
Company Guidance
During The Gap, Inc.'s third quarter 2025 earnings call, the company reported a strong performance, exceeding expectations across several key metrics. Net sales for the quarter reached $3.9 billion, up 3% year-over-year, with a comparable sales increase of 5%, marking the highest quarterly comp in over four years. Old Navy, Gap, and Banana Republic all posted positive comps, with Old Navy's sales up 6%, Gap's up 7%, and Banana Republic's up 4%. The company achieved an operating margin of 8.5% and ended the quarter with $2.5 billion in cash. Gross margin was reported at 42.4%, slightly down by 30 basis points from the previous year, primarily due to tariff impacts, although this was partially offset by strong AUR growth and reduced discounting. The company's financial outlook for fiscal 2025 was updated, with net sales growth expected at the high end of the prior range and an operating margin target of about 7.2%. The call also highlighted The Gap, Inc.'s strategic priorities, including brand reinvigoration, digital engagement, and supply chain enhancements, which have collectively contributed to the company's robust performance and positive momentum.Gap Inc Financial Statement Overview
Summary
Gap Inc. demonstrates strong financial performance with significant improvements in revenue growth and profitability. The company has effectively managed its leverage, resulting in a healthier balance sheet. Cash flow generation is strong, although historical volatility in growth rates suggests the need for cautious cash flow management.Income Statement
Gap Inc. has shown a strong recovery in its income statement metrics. The TTM data indicates a significant revenue growth rate of 74.5%, reflecting a robust rebound. Gross profit margin is healthy at 41%, and the net profit margin has improved to 5.57%. EBIT and EBITDA margins are also solid, indicating effective cost management and operational efficiency. However, the company has experienced fluctuations in revenue growth in previous years, which could pose a risk if not managed well.75
Positive
Balance Sheet
The balance sheet shows a moderate level of financial stability. The debt-to-equity ratio has improved to 1.51 in the TTM period, indicating better leverage management compared to previous years. Return on equity is strong at 24.91%, reflecting good profitability relative to shareholder equity. However, the equity ratio is relatively low, suggesting a higher reliance on debt financing, which could be a risk if market conditions change.65
Positive
Cash Flow
Cash flow metrics indicate a positive trend with a free cash flow growth rate of 130% in the TTM period, showcasing strong cash generation capabilities. The operating cash flow to net income ratio is 0.37, and the free cash flow to net income ratio is 0.64, both indicating efficient cash flow management. Despite these strengths, the company has experienced volatility in free cash flow growth in past periods, which could impact future cash flow stability.70
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 15.28B | 15.09B | 14.89B | 15.62B | 16.67B | 13.80B |
| Gross Profit | 6.27B | 6.23B | 5.78B | 5.36B | 6.64B | 4.71B |
| EBITDA | 1.72B | 1.72B | 1.17B | 489.43M | 994.00M | -403.00M |
| Net Income | 851.00M | 844.00M | 502.00M | -202.00M | 256.00M | -665.00M |
Balance Sheet | ||||||
| Total Assets | 12.37B | 11.88B | 11.04B | 11.39B | 12.76B | 13.77B |
| Cash, Cash Equivalents and Short-Term Investments | 2.52B | 2.59B | 1.87B | 1.22B | 877.00M | 2.40B |
| Total Debt | 5.52B | 5.47B | 5.44B | 6.02B | 6.25B | 7.66B |
| Total Liabilities | 8.72B | 8.62B | 8.45B | 9.15B | 10.04B | 11.15B |
| Stockholders Equity | 3.65B | 3.26B | 2.60B | 2.23B | 2.72B | 2.61B |
Cash Flow | ||||||
| Free Cash Flow | 779.00M | 1.04B | 1.11B | -78.00M | 115.00M | -155.00M |
| Operating Cash Flow | 1.22B | 1.49B | 1.53B | 607.00M | 809.00M | 237.00M |
| Investing Cash Flow | -443.00M | -692.00M | -334.00M | -227.00M | -446.00M | -510.00M |
| Financing Cash Flow | -486.00M | -321.00M | -567.00M | 6.00M | -1.47B | 895.00M |
Gap Inc Technical Analysis
Positive
28.20
Price Trends
26.77
Positive
24.55
Positive
23.21
Positive
Market Momentum
0.54
Negative
64.43
Neutral
87.38
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GAP, the sentiment is Positive. The current price of 28.2 is above the 20-day moving average (MA) of 27.45, above the 50-day MA of 26.77, and above the 200-day MA of 23.21, indicating a bullish trend. The MACD of 0.54 indicates Negative momentum. The RSI at 64.43 is Neutral, neither overbought nor oversold. The STOCH value of 87.38 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for GAP.
Gap Inc Risk Analysis
Gap Inc disclosed 31 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $6.62B | 13.45 | 19.34% | ― | 11.09% | 51.51% | |
76 Outperform | $10.79B | 12.99 | 25.10% | 2.45% | 0.29% | 3.65% | |
74 Outperform | $4.84B | 9.50 | 40.72% | ― | 7.57% | 1.75% | |
74 Outperform | $4.10B | 20.87 | 12.36% | 2.09% | -1.15% | -0.98% | |
72 Outperform | $2.58B | 12.39 | 41.26% | 6.82% | 4.67% | 3.46% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% |
* Consumer Cyclical Sector Average
GAP
Gap Inc
29.01
6.58
29.33%
ANF
Abercrombie Fitch
105.56
-9.33
-8.12%
AEO
American Eagle
24.18
8.71
56.34%
BKE
Buckle
50.45
9.20
22.31%
URBN
Urban Outfitters
73.82
16.22
28.16%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
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.