We maintain Outperform recommendation on Gap, Inc. (GPS) as we anticipate the company to perform well above the market. The Gap is the leading player in the highly fragmented specialty retail sector, and has a market cap more than double its nearest competitor.
The company has improved its business model by realigning its inventory to sales trends. In addition, the company has a strong balance sheet with adequate liquidity and no outstanding debt. The Gap has also been active on the share buyback front and has been paying a steady dividend.
However, consumer discretionary spending would continue to be under severe stress, which limits the upside potential of the company. Our six-month target price is $24 per share.Zacks Investment Research
