FBR Capital Sticks to Their Hold Rating for Gap

By Jason Carr

FBR Capital analyst Susan Anderson reiterated a Hold rating on Gap (NYSE: GPS) today and set a price target of $28. The company’s shares opened today at $24.

Anderson observed:

“GPS reported 1Q17 adjusted EPS of $0.36, versus FBR/consensus of $0.29, on SSS of +2% (versus FBR/consensus of 0.4%/–0.1%), GM expansion of +271 bps (versus FBR/consensus +50 bps/+30 bps), and SGA de-leverage of –179 bps (versus FBR/ consensus –100 bps/–80 bps). Management reiterated 2017 EPS guidance of $1.95 to $2.05 (versus FBR/consensus of $2.00/$1.99) on SSS of flat/slightly up, though EPS for 1H17 should be –MSD, versus –HSD previously. AUR was positive across all brands in 1Q, and we believe GPS has been able to pull back on promos to help drive AUR/margins. 1H17 inventory guidance shifted to flat from –LSD previously, mainly driven by timing. We like the strong ON performance, which we believe can continue, but we remain on the sidelines until we see consistent SSS improvement at Gap and sustained gross margin improvement or a more attractive entry point.”

According to TipRanks.com, Anderson is a 1-star analyst with an average return of -0.3% and a 45.8% success rate. Anderson covers the Services sector, focusing on stocks such as Ascena Retail Group, Abercrombie Fitch, and ClubCorp Holdings.

Currently, the analyst consensus on Gap is Hold and the average price target is $26.50, representing a 10.4% upside.

In a report released yesterday, BMO Capital also reiterated a Hold rating on the stock with a $28 price target.

The company has a one year high of $30.74 and a one year low of $17.31. Currently, Gap has an average volume of 5.44M.

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Gap, Inc. operates as a global apparel retail company. It offers apparel, accessories, and personal care products for men, women and children. The company operates through segments: Gap Global, Old Navy Global, Banana Republic Global, Athleta, and Intermix. The Gap Global segment includes apparel and accessories for men and women under the Gap brand, along with the GapKids, BabyGap, GapMaternity, GapBody and GapFit collections. The Old Navy Global segment offers clothing and accessories for adults and children. The Banana Republic Global segment provides clothing, eyewear, jewelry, shoes, handbags and fragrances. The Athleta segment offers fitness apparel for women. The Intermix segment features styles from various designers. Gap was founded by Donald G. Fisher and Doris F. Fisher in July 1969 and is headquartered in San Francisco, CA.