He noted in a commentary that management forecast mid- to high-teens-percent net sales growth and a 5% operating margin for fiscal 2021, which began Feb. 1.
Gap recently traded at $27.01, up 6.4%. It has surged 91% over the past year, withstanding the huge blow that the COVID pandemic laid on the apparel sector and the broader economy.
Boss raised his price target to $32 from $30 and affirmed his overweight rating. He sees “five key catalysts on tap” for Gap.
· Spending of government stimulus money at Old Navy.
· The launch of the Yeezy clothing line at Gap, which is expected by June 30.
· A retail recovery at Banana Republic, sparked by occasion spending and dressware in the second half of fiscal 2021.
· A strategic review of European company-operated stores, with potential closures or conversion to a franchise model.
· A strategic review of Intermix, a women’s fashion brand owned by Gap.
At Jefferies, on the other hand, analyst Janine Stichter was a bit less enthusiastic. “The fourth quarter was mixed,” she wrote in a commentary.
There were “signs of the company's Power Plan taking hold in the form of significant occupancy leverage, lower markdowns, and a better trend at the core Gap brand,” she said.
But that was “offset by a moderating trend at Old Navy. Margin enhancing initiatives are encouraging, but we look for greater clarity around Old Navy, which remains the key profit driver for GPS,” she said.
Stichter affirmed her hold rating and raised her price target to $25 from $24.
And at Morningstar, analyst David Swartz wrote on Thursday that "no-moat Gap underperformed our estimate of 1% growth with a sales decline of 5% in the fourth quarter of 2020.
"Still, its profit margins were better than we had forecast, and its 2021 outlook is in line with our expectations.
We expect to lift our per share fair value estimate of $21 by a mid-single-digit percentage, but view Gap’s shares as slightly overvalued."