Gap Stock Brushes Off Quarterly Results, Strong Forecast

Analysts have chimed in with mixed sentiment

Digital Content Manager
Mar 4, 2022 at 10:42 AM
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Apparel retailer Gap Inc (NYSE:GPS) reported smaller-than-expected fourth-quarter losses of 2 cents per share after yesterday's close, as well as revenue beat. In addition, the company issued a strong 2022 earnings forecast, noting it expects inventory at the end of the current quarter to increase more than 20% year-over-year, as it counters longer in-transit times with stockpiling. However, GPS reversed its morning surge, down 2.9% to trade at $13.83 at last glance. 

The brokerage bunch is having mixed reactions to the results. The security received three price-target cuts this morning, including one from Credit Suisse to $16 from $20. Meanwhile, J.P. Morgan Securities and MKM Partners both lifted their price objectives to $20 and $17, respectively. Analysts are mostly pessimistic towards GPS, with eight of 10 in coverage rating it a "hold" or worse. 

That pessimism is echoed among short sellers. In fact, short interest rose 51% in the most recent reporting period, and the 31.48 million shares sold short now make up a whopping 16.1% of the security's available float, or over three days' worth of pent-up buying power.

The options pits have a penchant for puts, too. This is per Gap stock's Schaeffer's put/call open interest ratio (SOIR) of 1.26, which stands higher than 91% of readings from the last year. This means short-term options traders have rarely been more put-biased.

A shift in sentiment seems to be taking place today, though. So far, 27,000 calls and 20,000 puts have crossed the tape, or nine times the intraday average. Most popular is the 3/4 15-strike call, followed by the 15.50-strike call in the same series, both of which expire later today.

On the charts, the equity is testing a floor at the $13 level, home to its Feb. 24 18-month low of $13.12, after surging as high as $16.14 earlier today. Over the past nine months, Gap stock has shed 56.4%, while overhead pressure at its 60-day moving average has guided the stock lower since November.

 

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