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Gap Drops After Results Beat; Analyst Notes Weakness at 2 Units

Gap topped analysts earnings and revenue estimates and two analysts raised their price targets.
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Shares of Gap (GPS) - Get Gap Inc. (The) Report were lower on Friday even after the apparel retailer topped analysts' fiscal-first-quarter estimates and two investment firms raised their price targets on the stock. 

At last check the shares of the San Francisco company were off 5% at $33.38. 

Analysts at RBC Capital affirmed their outperform rating on Gap while raising their price target to $40 a share from $33. 

The investment firm cites the company's first-quarter beat as evidence of increasing tailwinds as management speeds its plan to meet a 10% margin based on earnings before interest and taxes by fiscal 2023. 

Analyst Beth Reed also says the company's higher-margin growth brands, Old Navy and Athleta, can take market share going forward. 

Meanwhile analysts at B. Riley raised their price target on Gap to $35 from $34 while reiterating a neutral rating. 

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The investment firm noted "continued weakness" in the Banana Republic and Gap brands while also expressing concern about Gap's future performance in the wake of store closures. 

For the quarter ended May 1, Gap swung to earnings of $166 million, or 43 cents a share, against a loss of $932 million, or $2.51 a share, in the year-earlier quarter.

The latest adjusted earnings were 48 cents a share.

Revenue came in at $3.99 billion, up from $2.1 billion a year ago.

A survey of analysts by FactSet produced consensus estimates of a loss of 3 cents a share, or an adjusted loss of 5 cents a share, on revenue of $3.44 billion.

Comparable-store sales rose 35% at Old Navy Global, 29% at Gap Global and 27% at Athleta from the year-earlier quarter. Same-store sales at Banana Republic dropped 4% year-on-year.