Why Gap Inc (GPS) Stock Is Surging Today

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Gap Inc (NYSE:GPS) had a good start to the day as the company received a vote of confidence from analysts.

Gap Inc (GPS)Last week, the company revealed how it’s been performing from brand to brand. The future looks promising for the company despite the fact that its Gap brand has been on the decline as the retailer’s Old Navy business has continued to grow, with sales from that brand expected to reach $10 billion.

On Tuesday, Jefferies analyst Randal Konik named Gap a Jefferies Franchise Pick, which include companies with “market caps that range from $2 billion to $180 billion and P/E ratios that range from 9x to about 27x.” Old Navy sales make up more than half of the company’s revenue.

“The objective is to include the firm’s highest conviction, most differentiated calls, which span a wide range of sectors, market caps and valuations,” the ranking adds. Konik said that his firm is a buyer as Old Navy has impressed due to its products’ value in the fast fashion market.

“A majority of company cash flows, strategic moves are value-enhancing LT, and data scrapes show lower promos NT across Gap and ON…With mgmt. divulging div. margins for the 1st time in history (yes history), what’s clear is Old Navy is generating ~3/4 of profits. This data point is seminal when considering the entire org is valued like Gap division drives the bus (currently only ~7% of profits),” he added.

GPS shares surged 7.5% Tuesday.


Article printed from InvestorPlace Media, https://investorplace.com/2017/09/gap-inc-gps-2/.

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