Morgan Stanley upgraded GPS to "overweight"
Morgan Stanley named Gap Inc (NYSE GPS) stock one of its top picks this morning, upgraded it to "overweight" from "equal weight," and hiked its price target to $29 from $27. The analyst praised the apparel retailer's topline growth and profitability prospects. In response, GPS was last seen up 2.6% to trade at $23.67.
Analysts were split on GPS coming into today, with eight calling it a tepid "hold" or worse, while eight said "strong buy." This suggests more upgrades could still be on the horizon. Additional tailwinds could come from an unwinding of short interest, with 15.8% of Gap stock's available float sold short.
The shares have struggled below the $25 level since pulling back from their June 3, two-year high of $30.74. The 20-day moving average is adding pressure as well, though the $22.50 level remains as a floor. Over the last 12 months, however, GPS has added more than 148%.
At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 3.87 sits higher than 95% of annual readings. This means calls have been much more popular than usual.
Plus. premiums are affordable amid low volatility expectations, per the stock's Schaeffer's Volatility Index (SVI) of 51% that ranks higher than just 16% of readings from the past year.