After the market close on Thursday, the San Francisco-based retailer provided a weak 2016 earnings outlook.
Though the firm is conservative regarding Gap's forecasts, Jefferies expects the company to benefit from improved products. Gap should also benefit from broader adoption of the "best practices" used at Old Navy stores, Jefferies said.
"We have adjusted our numbers downward to reflect muted top-line visibility but believe the fundamental bottom is near," the firm said. "...With foreign exchange pressures abating, margin compares easing, and valuation of cash flows low, we like the risk/reward here."
Gap stock is down by 2.54% to $26.90 in early-morning trading on Friday.
Separately, TheStreet Ratings currently has a "Hold" rating on the stock with a letter grade of C.
The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and disappointing return on equity.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: GPS