Gap (GPS) Surges 7.2%: Is This an Indication of Further Gains?
Gap (GPS) shares rallied 7.2% in the last trading session to close at $35.47. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 13% gain over the past four weeks.
Gap’s stock rally is an extension of its continued efforts to amplify growth at its Old Navy and Athleta brands. In a recent event, the company signed a long-term deal with Simone Biles to endorse its Athleta brand. Earlier, Simone was the brand ambassador for NIKE. The Athleta brand’s values-driven active and lifestyle categories, increased digital marketing investments, and focus on product strategy have been aiding sales. Also, the company has been witnessing strong growth at its powerhouse brand – Old Navy, which provides affordable high-quality fashion for the whole family.
The company’s Power Plan 2023 focuses on opening highly-profitable Old Navy and Athleta stores while closing the underperforming Gap and Banana Republic stores. As part of the plan, the company expects the Old Navy and Athleta brands to contribute about 70% of sales by 2023. Notably, Athleta reached more than $1 billion in sales during fiscal 2020 and is likely to reach $2 billion by 2023.
Price and Consensus
This clothing chain is expected to post quarterly earnings of $0.17 per share in its upcoming report, which represents a year-over-year change of +106.8%. Revenues are expected to be $3.41 billion, up 61.7% from the year-ago quarter.
While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
For Gap, the consensus EPS estimate for the quarter has been revised 35.9% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on GPS going forward to see if this recent jump can turn into more strength down the road.
The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>
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