Morgan Stanley raises Gap stock price target to $23 on margin strength
Morgan Stanley has increased its price target for Gap, Inc. (NYSE:GAP) to $23.00, up from $21.00, while keeping an Equalweight rating on the shares. They reached this decision following better-than-expected second-quarter results. The stock's current valuation, with a P/E ratio of 8.48 and a market cap of $7.48 billion, suggests it is currently undervalued.
The firm highlighted the positive trends in Old Navy's performance and the resilience of its margins as the factors driving the price target increase. Morgan Stanley's confidence in Gap's eventual earnings power has been bolstered by the company's performance outperforming their expectations. However, they remain cautious, awaiting further evidence of the expected inflection in Old Navy's performance and low-double-digit percentage EBIT margins.
The analyst reiterated that Gap Inc. remains an Equalweight recommendation. In response to Gap's Q2 results, UBS increased its price target to $42 from $40, maintaining a Buy rating, whereas Wells Fargo adjusted its target to $23 from $22, citing the resilience of Gap's Old Navy brand.
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