Shares for Gap Inc. are up in the double digits during Monday trading, after analysts upgraded the company amid the economy’s gradual reopening.
In a distribution note shared this morning, J.P. Morgan analyst Matthew Boss raised his rating on the retail group’s shares to neutral from underweight. Its price target was also improved to $11 from $7. As a result, Gap shares advanced more than 12% to nearly $10 as of 1:30 p.m. ET.
According to the investment banking firm, top-line weaknesses at the company’s core brands — Gap and Banana Republic — continue to put pressure on its balance sheet, but it believes Old Navy is “benefitting larger picture from the disproportionate growth of ‘value retail.'” It added expectations for market share to be “up for grabs” as a result of department store chain JCPenney’s recent bankruptcy.
What’s more, JPMorgan anticipates that Athleta will be “well positioned” to capitalize on the growth of the athletic apparel sector amid the COVID-19 health crisis. Stay-at-home orders and federal efforts to prevent the spread of the illness have led to greater health and wellness awareness, coupled with the continued surge of leisure wear and work-from-home fashion — two new accelerants that analysts said could propel the brand forward.
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Stores owned and operated by Gap Inc. — also parent to brands Intermix and Janie & Jack — were shuttered across the country in mid-March, leading the company to furlough a majority of its employees in the U.S. and Canada. However, the company announced last month it planned to reopen about 800 locations by the end of May.
In April, the San Francisco-based chain cautioned that it might not have enough cash to fund its business through the end of 2020. In a filing with the Securities and Exchange Commission, it wrote that it would have to seek additional sources of liquidity, including a combination of new debt financing or other short-term credit facility, in order to continue operations. It had also skipped rent payments in North America and is currently squaring off with commercial landlords in court.
Gap is set to report its first-quarter earnings results after the market closes on Thursday.