Gap Stock Continues to Struggle After Bear Note

The majority of analysts were already bearish toward GPS

Deputy Editor
Jan 18, 2022 at 10:53 AM
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Gap Inc. (NYSE: GPS) was hit with a bear note by Morgan Stanley today, sending the shares 7.2% lower to trade at $16.95. The analyst in question downgraded Gap stock to "underweight" from "equal-weight," saying it forecasts all mall-based retailers' margins to revert back to a declining path seen before the pandemic started.

The majority of analysts were already pessimistic toward GPS, with eight of 10 in coverage rating the security a tepid "hold." There's room for additional price target cuts, though, as the 12-month consensus price target of $22.99 is a 33.8% premium to the stock's current level of trading. 

In the options pits, puts rule the roost. This is per Gap stock's 50-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). That ratio sits higher than all but 1% of readings in its annual range, suggesting a much healthier-than-usual appetite for puts in the last 10 weeks. Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 1.02, which ranks in the 82nd annual percentile -- highlighting a massive appetite for puts among short-term speculators, as well. 

GPS premium can be had for a bargain right now. This is per the equity's Schaeffer's Volatility Index (SVI) of 45%, which ranks in the low 15th annual percentile. This means options traders are pricing in lower-than-usual volatility expectations.

A late-November bear gap sent Gap stock careening to its lowest trading level since September 2020,below $16. Most noteworthy trendlines are pressuring GPS at the moment, as the equity looks likely to continue to add to its 22.5% year-over-year losses.

 

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