What happened

Shares of Gap (NYSE:GPS) were moving higher on Monday, after a key analyst raised his price target and upgraded the stock.

As of 10:45 a.m. EDT today, Gap's shares were up 14.4% from Friday's closing price.

So what

In a note on Monday morning, J.P. Morgan analyst Matthew Boss raised his rating on Gap's shares to neutral from underweight, and his price target to $11 from $7. 

A Gap sign outside a store.

Image source: Gap.

Noting that the company's shares are down about 70% since October of 2018, Boss wrote that they now trade below the average valuation for "distressed retail" as a group, four times enterprise value to EBITDA (earnings before interest, tax, depreciation, and amortization). 

Doesn't that make them a buy? Not quite. The range of outcomes for Gap's business as the COVID-19 pandemic fades is wide: an $8 fundamental risk-reward range, as Boss sees it. But, he said, the pandemic could give the company a catalyst to consider closing more of its Gap and Banana Republic brick-and-mortar stores. 

Now what

Consumer-discretionary investors won't have to wait much longer to hear from CEO Sonia Syngal and her team. The company will report its fiscal first-quarter earnings results after the market closes on Thursday, June 4. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.