What's Driving Gap's Stock Price?

Core Insights - Gap Inc. stock is currently priced around $21 per share after a 6% rise year-to-date, while its peer Guess stock has declined by 4% over the same period [2] - The company has seen a significant decline in sales, with revenues dropping from $16.7 billion in 2021 to $14.9 billion in 2023, an 11% decrease [2] - Positive signs of a turnaround are emerging, with comparable sales returning to growth across brands in FY 2024 [2] Financial Performance - Gap's revenue grew 4% year-over-year to $7.1 billion in the first half of FY 2024, with gross profits increasing to 97 cents per share compared to 27 cents per share in the same period last year [4] - The company reported a 59% year-over-year increase in cash and cash equivalents to $2.1 billion, and free cash flow improved to $397 million from $324 million [5] - Gross margin expanded by 360 basis points to 40.9% in the first six months of FY 2024, attributed to reduced promotional activity and improved inventory management [5] Market Outlook - Gap forecasts revenues of $15 billion for FY 2024, with expected earnings per share of $1.88, leading to a revised valuation of $22 per share, approximately 7% higher than the current market price [6] - The company anticipates slight sales growth from $14.9 billion in FY 2023, with low to mid-teens operating income growth and a gross margin expansion to around 40.8% [7] - Old Navy and Gap brands are expected to perform well, while Athleta may struggle due to elevated discounting and Banana Republic's recovery will take longer [7]