UBS maintained its Buy rating on Gap Inc. on Tuesday, citing the retailer’s projected earnings growth and margin expansion despite softer-than-expected sales at its Old Navy brand.
The Swiss bank kept its price target at $42, underscoring confidence in Gap’s long-term trajectory. Second-quarter adjusted earnings of $0.52 per share exceeded Wall Street estimates of $0.49, though revenue of $3.7 billion matched expectations and declined 2% year-over-year. Gap also raised its full-year outlook for earnings, operating margin, and gross margin.
UBS highlighted two key growth drivers: expansion in Gap’s beauty and handbag segments and an expected rebound in overall sales growth within the next six months. The bank also noted Gap’s aggressive stock buyback program, with management actively repurchasing shares.
Analysts from Morgan Stanley and Wells Fargo separately adjusted their price targets to $23, maintaining Equal-weight ratings. Morgan Stanley’s outlook reflects a more conservative stance compared with UBS’s bullish stance.
UBS’s forecast includes a 23% earnings-per-share increase by fiscal 2027, up from 12% in fiscal 2026 and a projected 3% decline in fiscal 2025. The bank projects Gap’s price-to-earnings ratio will rise to 13 times from 9 times, while current metrics show a P/E of 9.4 and a PEG ratio of 0.16.
Old Navy’s first-half 2026 comparable sales growth was described as disappointing, though analysts anticipate sequential improvements in the coming months.
