Gap Stock Down 15% In A Month, Looks Like A Steal At $14?

-19.81%
Downside
14.49
Market
11.62
Trefis
GPS: Gap logo
GPS
Gap

Gap’s stock (NYSE: GPS), a specialty retailer selling casual apparel, accessories, and personal care products for men, women, and children under the Gap, Old Navy, and Banana Republic brands, has declined 15% over the twenty-one trading days (one month) and currently stands near $14. It should be noted that the broader S&P500 returned a 7% decline during the same period. In 2021, the company faced headwinds with supply chain issues weighing heavily on its performance, particularly driven by longer transit times from the West Coast port delays and sudden and prolonged closure of factories in Vietnam. To avoid congested ports, Gap chose to ship a larger portion of its merchandise via air freight services. And, these more expensive shipping options weighed on its profits in the second half of the year. That said, the retailer’s full-year revenue was still up 21% year-over-year (y-o-y) and was nearly 2% above 2019’s levels. In addition, the company swung from a larger loss of $665 million in 2020 (or -$1.78 per share) to a profit of about $256 million in 2021 (or $0.68 per share). This was impressive given that the company saw a 5% higher operating expense and a 10% rise in the cost of goods sold and occupancy expenses in 2021. These full year’s results give hope that the company is bouncing back from the dim days of 2020, although it still continues to face challenges in terms of supply chain headwinds.

Going forward, Gap expects its top-line to grow by low single-digit percentages in 2022, while full-year earnings of $1.85 to $2.05 per share could be as much as triple what the company posted for fiscal 2021. The company’s management is diversifying port exposure through Eastern and Southern ports, growing its Mexico and Central America sourcing in 2022 to increase manufacturing speed, divesting smaller non-strategic brands, and shedding underperforming North American stores – to further strengthen its core business. The company’s stock is down 21% year-to-date, and down almost 50% in the last year. So does GAP stock still look very cheap at current levels? We certainly think so.

Now, is GPS stock poised to decline in the short term or are gains looking more likely? Based on our machine learning analysis of trends in the stock price over the last ten years, there is a 53% chance of a rise in GPS stock over the next month (twenty-one trading days). See our analysis on Gap Stock Chance Of Rise for more details.

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  3. What To Expect From Gap’s Stock After Q1?
  4. Is Gap Stock Undervalued?
  5. What To Expect From Gap’s Stock Post Q4?
  6. What’s Next For Gap’s Stock After A 30% Fall?

Calculation of ‘Event Probability’ and ‘Chance of rising’ using last 10 year data

[1] Returns of 4.6% or higher over five-day period on 341 occasions out of 2515 (14%); Stock rose in the next five days in 176 of these 341 instances (52%)

[2] Returns of 2.6% or higher over ten-day period on 788 occasions out of 2516 (31%); Stock rose in the next ten days in 412 of these 788 instances (52%)

[3] Returns of -15% or lower over twenty-one-day period on 174 occasions out of 2515 (7%); Stock rose in the next twenty-one days in 92 of these 174 instances (53%)

It is helpful to see how its peers stack up. GPS Peers shows how Gap compares against its peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GPS Return -1% -18% -36%
 S&P 500 Return -5% -12% 86%
 Trefis MS Portfolio Return -5% -15% 235%

[1] Month-to-date and year-to-date as of 3/9/2022
[2] Cumulative total returns since the end of 2016

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