Gap expected to beat Q1 profit estimates
Published: 13:25 21 May 2025 EDT
Gap Inc (NYSE:GPS)’s upcoming first quarter earnings report is expected to be a positive catalyst for its stock, according to analysts at UBS who have raised their price target on the clothing retailer.
UBS boosted its price target to $29 from $19 on ‘Neutral’-rated Gap on an improved gross margin outlook, which reflects the latest US tariff policy and increased confidence in the company’s long-term growth prospects.
For Q1, analysts on average expect Gap to report earnings per share (EPS) of $0.44 on revenue of $3.42 billion for the quarter.
The UBS analysts expect EPS to outperform the Street by $0.04, projecting $0.48, and Gap to guide Q2 EPS slightly above the consensus estimate of $0.59.
The analysts project Q1 sales growth of 1.9% year-over-year, compared to the 0.8% sales growth consensus estimate.
“Our checks suggest Gap's Q1 and Q2 to date sales trends were solid,” analysts wrote in a note.
Notably, the Banana Republic and Gap brands gained social media momentum in April.
“Our analysis of industry observed sales, observed customers, and estimated visits data indicates Gap's Q1 2025 sales growth rate should slightly beat the sell-side consensus estimate,” analysts wrote.
“We believe this type of report will lead to modest upward revisions of sell-side EPS estimates and boost Gap’s 12x price-to-earnings ratio higher.”
Although UBS anticipates a solid quarterly report from Gap, the firm is keeping its 'Neutral' rating due to subdued investor sentiment and relative valuation.
The analysts noted that Gap’s crowding score has declined significantly and now sits well below both its historical average and that of its peers.
They also pointed out that short interest, while still elevated, has decreased in recent months and is now under long-term averages for both the company and the broader Softline sector.
Gap will hand down its Q1 earnings report after US markets close on Thursday, May 29.
Shares of Gap traded hands at about $28 on Wednesday afternoon, up almost 18% in the year to date.
