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Gap Inc (GAP)
NYSE:GAP

Gap Inc (GAP) AI Stock Analysis

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Gap Inc

(NYSE:GAP)

Rating:71Outperform
Price Target:
$25.00
▲(10.04%Upside)
The overall stock score reflects Gap Inc's strong financial performance and attractive valuation. Despite technical indicators suggesting a neutral to slightly bearish trend, the company's robust earnings call performance and strategic focus underpin its resilience. The potential impact of tariffs and challenges with specific brands like Athleta are noted risks.
Positive Factors
Margin Growth
All brands are showing improving profitability trajectories, increasing confidence in future margin growth.
Sales Growth
Gap & Old Navy combined represent approximately 80% of sales and are on a path of eight or more consecutive quarters of market share gains and new customer acquisition.
Negative Factors
Cost of Goods
Higher tariff burdens are anticipated to impact the cost of goods sold more than the market expected.
Earnings Impact
Management identified a net tariff headwind of $100-150M to operating income, which could impact earnings.
Tariff Impact
The stock is expected to come under pressure due to larger tariff headwinds than previously expected.

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

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 apparel and accessories under its various brand names. The company's revenue streams include sales from physical retail stores, which are either company-owned or franchised, and online sales through its e-commerce platforms. Gap Inc. capitalizes on its diverse brand portfolio to target different customer segments, from value-focused consumers at Old Navy to more premium offerings at Banana Republic and Athleta. Additionally, Gap Inc. benefits from strategic partnerships and collaborations with other brands and designers, which help attract new customers and drive sales. The company also invests in marketing and loyalty programs to boost customer retention and increase average transaction value, further contributing to its earnings.

Gap Inc Earnings Call Summary

Earnings Call Date:May 29, 2025
(Q1-2025)
|
% Change Since: -18.71%|
Next Earnings Date:Aug 21, 2025
Earnings Call Sentiment Positive
Gap, Inc. demonstrated strong financial performance with consistent market share gains and a leading position in e-commerce. However, challenges remain with Athleta's performance and the potential impact of tariffs. The company shows resilience and strategic focus, despite some brand-specific challenges.
Q1-2025 Updates
Positive Updates
Strong Financial Performance
Gap, Inc. delivered a 2% increase in comparable sales and a 24% growth in earnings per share to $0.51. Operating margin improved by 140 basis points to 7.5% compared to last year.
Market Share Gains
Old Navy and Gap brands achieved their ninth and sixth consecutive quarters of market share gains, respectively. Old Navy's net sales were $2 billion, up 3%, and Gap's net sales were $724 million, up 5%.
E-commerce Leadership
Gap, Inc. ranked as the number one apparel e-commerce business in the US, with online business growing 6% and representing 39% of total net sales.
Strong Cash Position
The company ended the quarter with a strong cash balance of approximately $2.2 billion, an increase of 28% from last year.
Successful Brand Collaborations
Gap's collaborations, such as the Gap Studio Collection by Zach Posen, generated over 1.3 billion impressions with strong full-price sell-through, demonstrating the brand's pricing power.
Negative Updates
Challenging Performance at Athleta
Athleta's net sales decreased by 6%, and comparable sales were down 8% as the brand continues to reset and work through an over-rotation towards new customers.
Impact of Tariffs
The estimated net impact of tariffs on fiscal 2025 operating income is projected to be $100 million to $150 million, primarily affecting the second half of the year.
Flat Performance at Banana Republic
Banana Republic's net sales were down 3% year over year, with comparable sales flat as the brand focuses on reestablishing its position.
Company Guidance
During The Gap, Inc.'s first quarter 2025 earnings call, the company reported a 2% increase in comparable sales and a 24% rise in earnings per share to $0.51, alongside a robust cash balance of approximately $2.2 billion. Key financial metrics highlighted were a 40 basis point expansion in operating margin and a 60 basis point increase in gross margin. Old Navy and Gap brands achieved respective comparable sales growth of 3% and 5%, while Banana Republic remained flat, and Athleta experienced an 8% decline. The company reaffirmed its fiscal 2025 outlook, projecting net sales growth of 1% to 2% and operating income growth of 8% to 10% while navigating potential tariff impacts estimated at $100 million to $150 million. The call underscored the company's strategic focus on diversifying its sourcing footprint, with aspirations for no single country to account for more than 25% of sourcing by the end of 2026.

Gap Inc Financial Statement Overview

Summary
Gap Inc presents a robust financial profile characterized by improved profitability, efficient operations, and solid cash management. The company maintains strong margins and returns, with moderate leverage and a healthy equity position. However, revenue growth is only steady, not exceptional.
Income Statement
75
Positive
Gap Inc shows strong recovery and steady growth in recent years. The Gross Profit Margin for TTM (Trailing-Twelve-Months) is 41.38%, indicating good cost management. The Net Profit Margin is 5.80%, an improvement from previous years. Revenue growth is modest at 0.50% from the prior year, showing stability. The EBIT Margin is 7.70% and EBITDA Margin is 10.68%, reflecting healthy operational efficiency.
Balance Sheet
68
Positive
Gap Inc's Balance Sheet highlights a moderate Debt-to-Equity ratio of 1.65, suggesting a balanced leverage situation. The Return on Equity (ROE) for TTM is 26.47%, which is robust and indicates effective use of equity. The Equity Ratio stands at 28.71%, reflecting adequate equity base compared to total assets.
Cash Flow
72
Positive
The company has a stable cash flow position, with Operating Cash Flow to Net Income Ratio at 1.50, indicating strong cash earnings. The Free Cash Flow to Net Income Ratio is 1.00, demonstrating efficient cash conversion. Free Cash Flow growth has been positive, though it shows a decline from the previous year.
BreakdownTTMMar 2025Mar 2024Mar 2023Mar 2022Mar 2021
Income Statement
Total Revenue15.16B15.09B14.89B15.62B16.67B13.80B
Gross Profit6.27B6.23B5.78B5.36B6.64B4.71B
EBITDA1.77B1.72B1.17B489.43M994.00M-403.00M
Net Income879.00M844.00M502.00M-202.00M256.00M-665.00M
Balance Sheet
Total Assets11.56B11.88B11.04B11.39B12.76B13.77B
Cash, Cash Equivalents and Short-Term Investments2.22B2.59B1.87B1.22B877.00M2.40B
Total Debt5.49B5.47B5.44B6.02B6.25B7.66B
Total Liabilities5.39B8.62B8.45B9.15B10.04B11.15B
Stockholders Equity3.32B3.26B2.60B2.23B2.72B2.61B
Cash Flow
Free Cash Flow879.00M1.04B1.11B-78.00M115.00M-155.00M
Operating Cash Flow1.32B1.49B1.53B607.00M809.00M237.00M
Investing Cash Flow-474.00M-692.00M-334.00M-227.00M-446.00M-510.00M
Financing Cash Flow-397.00M-321.00M-567.00M6.00M-1.47B895.00M

Gap Inc Technical Analysis

Technical Analysis Sentiment
Positive
Last Price22.72
Price Trends
50DMA
23.29
Negative
100DMA
22.00
Positive
200DMA
22.23
Positive
Market Momentum
MACD
-0.29
Negative
RSI
52.92
Neutral
STOCH
81.22
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 22.72 is above the 20-day moving average (MA) of 21.75, below the 50-day MA of 23.29, and above the 200-day MA of 22.23, indicating a neutral trend. The MACD of -0.29 indicates Negative momentum. The RSI at 52.92 is Neutral, neither overbought nor oversold. The STOCH value of 81.22 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 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 (67)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
ANANF
79
Outperform
$4.36B9.0246.98%12.54%25.47%
79
Outperform
$6.59B15.4219.55%8.38%52.18%
BKBKE
78
Outperform
$2.44B12.2744.55%2.94%-1.08%-8.20%
GAGAP
71
Outperform
$8.48B9.9029.16%2.92%1.07%28.03%
AEAEO
69
Neutral
$1.78B10.5212.19%4.85%-0.95%-10.51%
67
Neutral
¥253.34B13.186.44%2.78%5.06%-11.83%
FLFL
55
Neutral
$2.36B194.63-12.85%-2.62%0.93%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
GAP
Gap Inc
22.72
-0.04
-0.18%
ANF
Abercrombie Fitch
91.60
-86.93
-48.69%
AEO
American Eagle
10.28
-8.93
-46.49%
BKE
Buckle
47.66
14.26
42.69%
FL
Foot Locker
24.73
1.48
6.37%
URBN
Urban Outfitters
73.57
29.91
68.51%

Gap Inc Corporate Events

Shareholder Meetings
Gap Inc Holds Annual Shareholder Meeting
Neutral
May 23, 2025

On May 20, 2025, Gap Inc held its annual meeting of shareholders, where a quorum was present with 353,826,312 shares represented. During the meeting, shareholders voted to elect the directors nominated by the Board, ratified the selection of Deloitte & Touche LLP as the independent accountant for the fiscal year ending January 31, 2026, and approved the overall compensation of the company’s named executive officers on an advisory basis.

The most recent analyst rating on (GAP) stock is a Hold with a $25.00 price target. To see the full list of analyst forecasts on Gap Inc stock, see the GAP Stock Forecast page.

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.Date of analysis: Jul 02, 2025