Gap shares can rally more than 50% as Athleta sales improve, says UBS
UBS expects improving momentum to drive Gap higher. The bank upgraded the clothing retailer to buy from neutral. Besides the Gap brand, the company also operates Old Navy, Banana Republic and Athleta. Analyst Jay Sole also hiked his 12-month price target to $41 from $26, which implies a gain of 54% from Wednesday’s close. Sole believes Gap will be driven by stronger sales and earnings growth thanks to improving revenue growth for Athleta, and as Gap’s initiatives to grow its beauty and handbag businesses finally start taking off. GAP 1Y mountain GAP 1Y chart “GAP is making the right investments to grow its Beauty and Handbag businesses. We think the market is underestimating the size of the opportunity,” Sole wrote. He added that he has confidence in Athleta’s new management team, which he believes could successfully help revitalize the brand. Sole also pointed to increased conviction on the core Old Navy and Gap businesses. While some investors have expressed concerns that Gap had a weak holiday season, the analyst believes that it was resilient. The analyst now believes that Gap’s fiscal 2026 earnings growth could reach 14% next year, versus 2% in fiscal year 2025. He also raised his forecast for Gap’s five-year earnings compound annual growth rate to 10% versus prior estimates of 3%. “We anticipate GAP’s beauty and accessories businesses will be accretive to the company’s gross margin,” the analyst said. Shares of Gap have climbed 12% over the past 12 months.
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