Gap upgraded to Buy from Neutral at Citi

Citi analyst Paul Lejuez upgraded Gap to Buy from Neutral with a price target of $28, up from $21. After a strong Q4 where both Old Navy and Gap showed momentum and margins significantly above expectations, management guided fiscal 2024 earnings “very conservatively,” the analyst tells investors in a research note. Similar to 2023, the firm expects both Gap’s sales and earnings upside in fiscal 2024 and expect a significant Q1 beat, driven by stronger sales and margin flow through, making the company’s path more visible to achieving earnings per share of $1.80-$2.00 this year. Due to lingering supply chain issues and elevated marketing spend, Gap is one of the few retailers left with a depressed EBIT margin versus 2019, Citi notes. With the shares down 21% since March 21, it believes the stock’s risk/reward is favorable.