Morgan Stanley analyst Kimberly Greenberger upgraded shares of Gap Inc (NYSE:GPS) to Equal Weight from Underweight with an unchanged price target of $14.00 per share.
The analyst argues that concerns that forced MS to downgrade to Underweight are now mostly priced in. These concerns are mostly focused on turnaround uncertainty, soft execution, and too optimistic 2022 EPS guidance.
Greenberger is still pessimistic but notes that shares are down more than 20% YTD.
“While our concerns remain, with the stock nearing 5Y lows (ex-Covid) & our 2022e EPS estimate sitting nearly 70% below both consensus & the midpoint of guidance, we see limited room for further downside near-term & move to the sidelines. We continue to expect GPS to experience challenges. The retailer is in 'show-me' turnaround mode, with potentially optimistic near-term targets in light of ON mis-execution, ongoing freight headwinds, operating cost inflation, & y/y merchandise margin giveback risk,” Greenberger said in a client note.
GAP stock price is up nearly 2% in pre-open Monday.
By Senad Karaahmetovic