Gap Inc (GAP) Stock Forecast & Price Target

Gap Inc. concluded the second quarter with cash, cash equivalents, and short-term investments totaling $2.4 billion, reflecting a 13% increase year-over-year, which indicates strong liquidity and financial health. The company expects its total sales to rise by 2.1% year-over-year to approximately $3.911 billion, aligning closely with market consensus and demonstrating solid revenue momentum. Additionally, positive indicators include a 1% year-over-year increase in comparable store sales and a 3% growth in online sales, alongside Old Navy's position as the fifth-leading brand in the active category in the U.S., showcasing promising performance across various segments.

Gap's stock outlook is negatively impacted by a revised fiscal year 2025 earnings per share (EPS) estimate of $2.05, reflecting a decrease from a prior estimate of $2.20 and below the consensus of $2.16. The company's gross margin is expected to contract by 160 basis points to 41.1%, slightly below market forecasts, alongside a projected operating margin decline of 180 basis points to 7.5%, also below consensus expectations. Additionally, comparable sales have consistently declined, with a 9% year-over-year drop reported, exacerbating concerns regarding overall revenue performance amid flat total sales of approximately $3.725 billion.