GAP: Disciplined Leadership And Category Expansion Will Support Steady Margin Gains

Gap's analyst price target has risen from approximately $24.87 to $26.03 per share, as analysts cite improved leadership, ongoing brand recovery efforts, and the company's margin expansion initiatives as supporting factors for the upward revision.

Analyst Commentary

Recent Street research highlights a mix of optimism and caution regarding Gap's turnaround and valuation outlook. While many analysts see evidence of sustained momentum under new leadership, others point to ongoing uncertainty around macroeconomic factors and profitability visibility.

Bullish Takeaways

• Bullish analysts are encouraged by Gap's disciplined leadership strategy, emphasizing long-term recovery through product innovation, focused customer targeting, and improved marketing execution.
• There is recognition of a successful turnaround in the core Gap and Old Navy brands, with indications that new management has been effective in restoring growth and relevancy.
• Expansion into new categories such as beauty and accessories is seen as a strategic move that could unlock future growth and diversify revenue streams. However, benefits may materialize over time.
• Margin expansion initiatives and recent guidance are viewed as promising steps toward achieving higher operating margins. These developments support higher price targets from several bullish analysts.

Bearish Takeaways

• Bearish analysts remain cautious about the sustainability of margin gains and highlight the challenges posed by an uncertain macroeconomic environment, which may limit long-term profitability visibility.
• Some express concerns about the timing and impact of category expansions. They caution that new growth engines such as beauty may take a while to contribute meaningfully to earnings.
• There are notes of skepticism about achieving double-digit operating margins as previously anticipated, with tariff-related pressures and external risks acting as headwinds.
• Several analysts maintain a more balanced or neutral outlook on valuation and suggest that much of the recent improvement is already reflected in the current share price.

What's in the News

• Repurchased 3,434,491 shares between May 4 and August 2, 2025, bringing total shares repurchased to 39,828,667, or 10.66% of shares outstanding, since the February 2019 buyback announcement (Key Developments).
• Issued new earnings guidance for the third quarter and full fiscal year 2025, expecting net sales to grow 1.5% to 2.5% in Q3 and 1% to 2% for the full year compared to the prior year (Key Developments).
• Plans to close approximately 35 net stores during fiscal year 2025 (Key Developments).

Valuation Changes

• Consensus Analyst Price Target has risen slightly, moving from $24.87 to $26.03 per share.
• The discount rate increased marginally from 9.76% to 9.84%, reflecting mildly higher expected returns required by investors.
• Revenue growth projections edged up, now estimated at 1.85% from the previous 1.79%.
• Net profit margin estimates improved fractionally, up from 5.96% to 5.98%.
• The future P/E ratio climbed from 12.18x to 12.70x, suggesting increased confidence in Gap's forward earnings potential.