Proactive Investors - Gap Inc (NYSE:GPS), the clothing company, hasn’t been able to convince analysts that its better-than-expected fourth-quarter results signal any longer-term improvements.
While experts at UBS lifted the retailer’s price target by US$1 to US$9, it still represents a nasty 57% discount to the current share price.
UBS believes Gap still faces several challenges including the loss of market share and the decay of its profit margins.
In 2023, the group saw its share slip by 2% and the year prior it dropped by an additional seven percent, leaving UBS analysts lacking confidence in its growth prospects.
Forward-looking profit margin guidance for 2024 also highlighted the group’s downward trajectory compared to its pre-pandemic levels.
“We believe it will be hard for GPS to reverse its EBIT margin trend and this will ultimately lead to earnings misses and stock underperformance,” UBS said.
Underscoring UBS’s lack of love for the stock is further highlighted by it placing its 2025 earnings per share guidance 26% below the market’s consensus.
Last week, Gap shares jumped around 5% after it posted better-than-expected earnings for the crucial holiday quarter.
EPS for the three months ended December 31 were 49 cents, more than double the Street's figure of 23 cents, while revenue was $4.3 billion.