A Lot to Like About Newly Upgraded Retail Stock

There's room for more analysts to join the bullish GPS bandwagon

Deputy Editor
Feb 26, 2024 at 9:11 AM
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Gap Inc (NYSE:GPS) stock is 2.5% higher before the opening bell, after J.P. Morgan Securities upgraded the retailer to "neutral" from "underweight" and hiked its price target by $4 to $20. The analyst cited Gap's cost-cutting measures and increased product offerings.

Since hitting a more than two-year high of $22.08 on Dec. 11, Gap stock has traded in a consolidatory pattern with a series of dips and rallies. Despite the choppiness and 7% year-to-date deficit, the shares are poised to bounce off their 80-day moving average with today's pop and add to their 48.1% year-over-year gain. 

Coming into today, five brokerages rated the security a "strong buy," compared to 10 other "hold" or worse ratings, which leaves the door open for more upgrades that could offer a boost. There's room for additional price-target hikes, too, considering the 12-month consensus target price of $18.62 is a 4.3% discount to Friday's close.

A short squeeze is also a possibility. Short interest up 11.2% in the last two reporting periods, and the 28.59 million shares sold short make up 13.2% of the security's available float. This represents over four days' worth of pent-up buying power, at GPS' average daily trading volume.

Those looking to speculate with options should take advantage now. The equity's Schaeffer's Volatility Scorecard (SVS) of 75 out of 100 indicates that the equity usually outperforms volatility expectations. 


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