Gap Stock Moves Lower on Flurry of Post-Earnings Bear Notes

GPS is already down more than 38% year-to-date

Digital Content Manager
May 27, 2022 at 10:34 AM
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Gap Inc (NYSE:GPS) is down 2.2% to trade at $10.88 at last check, after the apparel retailer reported first-quarter losses of 44 cents per share -- much wider than the losses of 13 cents per share Wall Street expected. Though the company's revenue was slightly above expectations at $3.48 billion, Gap slashed its annual profit forecast, citing higher costs and weak demand due to inflation. 

The results are not sitting well with the brokerage bunch. J.P. Morgan Securities earlier downgraded the equity to "underweight" form "neutral," and lowered its price target to $9 from $11. Another seven firms slashed their price objectives as well, including BofA Global Research to $9.60 from $12. Analysts were already bearish on GPS coming into today, with 10 of the 13 in question calling it a tepid "hold" or worse.

Meanwhile, shorts are firmly in control. Though short interest is down 28.6% in the last two reporting periods, the 23.08 million shares sold short make up 11.4% of the equity's available float.

Options traders are chiming in, too. So far today, 14,000 puts and 7,141 calls have been exchanged, which is seven times the usual intraday amount. Most popular is the 6/3 10-strike put, where positions are currently being opened, followed by the 5/27 10-strike put.

That penchant for bearish bets has been the norm lately. This is per GPS' 10-day put/call volume ratio of 1.60 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks higher than all but 1% of annual readings. This indicates healthier-than-usual appetite for puts in the last two weeks. 

It has been a brutal last few months for Gap stock. In fact, the security is down 38.9% year-to-date, and just hit a May 24, roughly two-year low of $9.24. The 30-day moving average has been guiding shares lower since mid-April, while the $11.50 level turned down yesterday's rally. 

 

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