Gap upgraded to Overweight from Equal Weight at Wells Fargo

Wells Fargo analyst Ike Boruchow upgraded Gap to Overweight from Equal Weight with a price target of $16, up from $11. The setup for Gap “has become compelling” with right-sized inventory, improved cost controls and new management “set to inflect the narrative” and drive material upside to Street estimates, the analyst tells investors in a research note. The firm says that following years of inventory issues and gross margin contraction, the company has finally rightsized merchandise levels and inflected to a positive inventory-to-sales spread. Wells believes Gap’s 2025 earnings power can double Street expectations. The stock’s valuation is “cheap” and there is a 12-plus month target of $23 when looking out to 2025, contends the firm.