Gap shares rise after analysts upgrade
Difference (NYSE: GPS) saw its shares rise more than 6.5% in Tuesday morning trading after Citigroup Analysts have confirmed their price target on the clothing retailer at $ 24, which is more than 55% higher from the current share price. Most analysts are much less bullish on the stock, with most calling it neutral, but Citi has raised its rating from neutral to buy. Its price target is also just $ 5 above the Gap’s 52-week high of $ 19.86.
Citi analysts are particularly supportive of Gap’s Athleta brand for women and girls, setting its value at around $ 3.6 billion. In the research note accompanying the increase in ratings, Paul Lejuez said “with the favorable positioning of sports / casual retailers in a post-COVID world, GPS’s Athleta brand stands out with a value that may not be recognized by the market (as many others in their space have a higher revaluation). “
The analyst also pointed out that although Gap did not follow up on his plan to split off the Old Navy earlier in the year, the company’s willingness to consider such a major change demonstrates management’s willingness to “take corporate action to unleash shareholder value.”
Lejuez’s rating appears to be based in part on the possibility that Gap will sell Athleta at some point in the near future. He said: “Athleta is one of the few sports brands with a combination of scale, but plenty of room for growth (which could be attractive for several acquiring companies).” Gap’s leadership, on the other hand, appears to be intent on keeping Athleta at this point, estimating it can double its sales from the current $ 1 billion to $ 2 billion through international expansion, according to Ike Boruchow, a Wells fargo analyst.
Gap will publish its latest quarterly results this Thursday, August 27.
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