Options Traders, Analysts Turn Bullish After Gap's Earnings

Analysts chimed in with positive price adjustments

Deputy Editor
Nov 17, 2023 at 10:41 AM
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Apparel retailer Gap Inc (NYSE:GPS) is surging this morning, last seen up 27.9% at $17.49 after a better-than-expected earnings report led to an uptick in call trading and a barrage of bull notes. 

After last night's close, Gap reported adjusted third-quarter earnings of 59 cents per share on revenue of $3.6 billion. Both figures beat Wall Street's estimates, giving investors hope despite a mild outlook for the holiday shopping season. 

In response, 66,000 calls have crossed the tape, or 43 times the average intraday volume. Meanwhile, 43,000 puts have exchanged hands, with total options volume running at 38 times the amount typically seen at this point. New positions are opening at the most popular, November 17 call, which expires at the end of today's session. 

No less than nine analysts hiked their price targets on GPS. Barclays and Guggenheim adjusted their objectives the highest, moving all the way up to $20, while BofA Global research hiked its target to $13 from $9. There's room for additional price-target hikes, too, as the 12-month average objective of $14.89 is a more than 16% discount to the stock's current perch. 

Analysts are mostly pessimistic on the stock, with 10 of 14 covering brokerages rating it a "hold" or worse, leaving Gap stock open to a round of upgrades. What's more, short interest fell 14.1% in the most recent reporting period, and the 37.27 million shares sold short now make up 18.1% of the security's available float, or nearly five days' worth of pent-up buying power. 

On the charts, the equity just crossed above the $17 level for the first time since February 2022. The shares are pacing for their best session in more than two years, and their fifth weekly win in six. Year to date, GPS is up 50.4%.

 

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