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Why Gap Stock Is Trading Higher Today

By John Rosevear – Updated Jun 1, 2020 at 10:21AM

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A key analyst upgraded it ahead of earnings.

What happened

Shares of Gap (GPS -4.40%) 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. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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The Gap, Inc. Stock Quote
The Gap, Inc.
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