Is Gap Stock the Best Retail Name to Buy Right Now?

GPS is closing out 2020 in bullish form after a rough year for retail

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The Gap, Inc. (NYSE:GPS -- $20.48) is one of the largest clothing and accessories retailers in the United States. The company’s collection of lifestyle brands includes Old Navy, Gap, Banana Republic, Athleta, Intermix, Janie and Jack, and Hill City brands. Gap also offers its products worldwide through company-operated stores, franchise stores, and e-commerce sites. GPS is one of the most heavily speculated upon "mall stocks" that have been rocked by the COVID-19 pandemic.

In 2020, Gap stock seemingly hit rock bottom after many years of down-trending. GPS stock price registered a record low of $5.26 back on April 2, but Gap stock has since jumped on a bullish run. GPS stock price even hit an annual high of $26.99 in November, and is about end the calendar year with a gain of about 15%.

As for earnings reports in 2020, GPS managed to outperform expectations on 50% of the earnings reports released in 2020. Gap stock outperformed earnings expectations in the first and third quarters, with margins of $0.17 and $0.24, respectively. However, Gap produced underwhelming results in the second and fourth quarter of 2020, reporting earnings misses of $1.84 and $0.07, respectively. Wall Street currently expects another drop in earnings per share for the company's next quarterly earnings report.

Gap has reported major declines in revenue and net profits this year, reporting a loss of approximately $2.3 billion in revenue, and over $1.4 billion in net income. These losses brought the company's total revenue to $14 billion and its total net losses to $1 billion over the past 12 months.

Regardless of the ugly fundamentals, investors remain hopeful that Gap stock can resume its growth from the years leading up to 2019. Prior to 2019, Gap had slow but steady top and bottom-line growth. At the moment, the most promising thing about Gap stock for potential investors has to be its forward price-earnings ratio of 15.95. Overall, it seems like Gap stock has already fixed its overcorrection after bottoming in March and could potentially be heading toward the light again in 2021.


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