The San Francisco-based apparel retail company, which operates Banana Republic and Old Navy stores, was rated as "underweight" due to ongoing uncertainty around its rebranding, Barclays said in an analyst note.
Gap's brand turnaround will likely take time, the firm added.
"Meanwhile, margins are facing a wide series of headwinds at a time when comps are negative, suggesting EPS could decline more from here," Barclays noted.
Barclays analysts projected Gap's fiscal 2015 earnings will be $2.55 per share and 2016 fiscal year earnings will be $2.30 per share.
Shares of Gap were down by 0.26% to $27.11 in mid-morning trading on Thursday.
Separately, TheStreet Ratings team rates GAP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate GAP INC (GPS) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, weak operating cash flow and a generally disappointing performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The current debt-to-equity ratio, 0.50, is low and is below the industry average, implying that there has been successful management of debt levels.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Specialty Retail industry and the overall market, GAP INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 41.46% is the gross profit margin for GAP INC which we consider to be strong. Regardless of GPS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.61% trails the industry average.
- Net operating cash flow has decreased to $431.00 million or 10.76% when compared to the same quarter last year. Despite a decrease in cash flow of 10.76%, GAP INC is in line with the industry average cash flow growth rate of -10.77%.
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Specialty Retail industry average. The net income has significantly decreased by 34.0% when compared to the same quarter one year ago, falling from $332.00 million to $219.00 million.
- You can view the full analysis from the report here: GPS