Gap Inc (GAP) Stock Forecast & Price Target

Gap's financial position is strengthened by a 13% increase in cash, cash equivalents, and short-term investments, totaling $2.4 billion. The company's comparable sales rose by 1% year-over-year, a positive shift compared to the previous quarter's flat performance, and online sales experienced a growth of 3% year-over-year. This combination of healthy cash reserves and improving sales metrics contributes to a favorable outlook for Gap's overall financial health.

Gap's financial outlook is negatively impacted by a downward revision of its FY25 EPS projections, now estimated at $2.05, which reflects a decline from both the previous year's EPS of $2.20 and the consensus expectation of $2.16. This downward adjustment is attributed to a 150-basis point contraction in merchandise margin, particularly due to the impact of prior-year sales linked to a revenue-sharing agreement with its credit card partner. Additionally, for the reporting period, total sales remained stagnant at approximately $3.725 billion, underperforming against a consensus estimate of $3.733 billion, indicating ongoing challenges in revenue generation.