Digital And Sustainable Trends Will Foster Long Term Value

Analysts have slightly raised their fair value estimate for Gap, increasing the price target from $24.38 to $24.74. This change is due to incremental improvements in profitability and margin potential following positive updates from recent research coverage.

Analyst Commentary

Recent analyst coverage of Gap has highlighted both encouraging momentum and lingering challenges for the company. Valuation updates and rating changes reflect shifting views on Gap's growth prospects, profitability, and sensitivity to broader economic variables.

• Bullish analysts believe Gap’s brands are regaining relevance. This supports opportunities to expand operating margins over the long term, potentially into double digits from current levels.
• Positive comparable sales trends across major banners such as Gap and Old Navy have been cited as evidence of the company’s successful repositioning and improving consumer appeal.
• Some have highlighted recent expansions, particularly into beauty and accessories, as strategic moves that could unlock new growth drivers and diversify revenues. The impact may take time to materialize.
• Upward revisions to price targets and earnings estimates by some bullish analysts reflect incremental improvements in profitability and execution. Recent earnings beats have reinforced this view.

• Bearish analysts remain concerned about tariff-related margin pressures. Gap’s ability to offset increased costs through pricing actions appears limited, particularly in a higher tariff environment.
• Concerns about macroeconomic uncertainty have led to downgrades and reduced price targets. Valuation adjustments reflect lower expectations for operating margin expansion.
• While some acknowledge short-term progress, doubts persist regarding long-term profitability and sustained execution amid ongoing market volatility.
• Recent coverage also highlights the risk that certain growth initiatives, such as category expansions, may take significant time to impact the bottom line and could delay meaningful margin improvement.

What's in the News

• The company completed a share repurchase of 3,434,491 shares between May 4 and August 2, 2025, totaling $81.29 million. Since February 2019, Gap has repurchased 39,828,667 shares for $750.56 million under its ongoing buyback program (Key Developments).
• Gap provided updated earnings guidance for the third quarter and full fiscal year 2025, expecting net sales growth of 1.5% to 2.5% for Q3 and 1% to 2% for the full year compared to the prior year (Key Developments).
• The company announced plans to close approximately 35 net stores during fiscal year 2025 (Key Developments).

Valuation Changes

• The Fair Value Estimate has risen slightly to $24.74 from $24.38 per share, reflecting a modest increase.
• The Discount Rate has increased to 10.07 percent from 9.81 percent, indicating slightly higher perceived risk in the valuation model.
• The Revenue Growth Projection has edged down marginally to 1.75 percent from 1.76 percent.
• The Net Profit Margin Estimate has improved slightly to 5.99 percent from 5.98 percent.
• The future P/E (Price-to-Earnings) Ratio has risen to 12.17x from 11.98x, suggesting higher expectations for future earnings multiples.