Gap Stock Jumps 18% in a Month: Is it a Good Time to Buy or Too Late?

The Gap Inc. GAP has demonstrated a notable stock performance in the past month, reflecting positive financial results and growth initiatives. The company’s strong earnings and sales performances in third-quarter fiscal 2024 were followed by a raised fiscal 2024 sales growth forecast. GAP’s optimistic outlook reflects its confidence in its ongoing turnaround strategy, which includes brand revitalization and operational improvements.In the past month, the company’s shares have rallied as much as 18.5%, surpassing the industry peers and the broader S&P 500 index’s rise of 14.1% and 3%, respectively. The company also outperformed the broader Zacks Retail-Wholesale sector's growth of 7.3% in the same period.One-Year GAP Stock Performance Image Source: Zacks Investment Research At the current price of $24.88, the stock trades at an 18.7% discount to its 52-week high of $30.59. The stock also trades at a significant premium of 35.7% to its 52-week low of $18.34.Gap’s strong performance in 2024 is supported by positive technical indicators. GAP trades above its 50 and 200-day moving averages, indicating robust upward momentum and price stability. The moving average is an important indicator for gauging market trends and momentum. This technical strength indicates positive market sentiment and confidence in the company's financial health and prospects.GAP Stock Trades Above 50 & 200-Day Moving Averages Image Source: Zacks Investment Research Strong Strategies Power Gap’s Stock MomentumGap is currently experiencing a strong stock performance, driven by several strategic initiatives designed to revitalize its brand and enhance operational efficiency. A central focus of the company has been on product innovation, with efforts to modernize its merchandise offerings. It has carved out a niche with its four distinct brands — Gap, Old Navy, Banana Republic and Athleta — each catering to unique market segments, thus providing diverse revenue streams and reducing overall risk.Gap's strategic focus extends beyond product innovation to include cost management and operational excellence. The company's leadership is prioritizing four key areas — improving financial and operational discipline, revitalizing its brands, strengthening its operational platform, and fostering a dynamic company culture.By aligning its product lines with evolving consumer preferences, especially in sustainability and casual wear, Gap has been able to strengthen its market position. The brand has also made substantial investments in its e-commerce platform, enabling it to engage a wider, tech-savvy customer base, thus driving significant growth in online sales.The company is also capitalizing on growth opportunities within its brands. Old Navy remains a dominant force, contributing more than half of Gap's total sales, thanks to its focus on value-driven fashion. Athleta continues to capture a larger share of the activewear market, positioning itself as a go-to brand for women's athletic wear. Gap's ongoing efforts to reposition Banana Republic in the premium lifestyle segment are showing promising results, while the successful revitalization of the Gap brand is enhancing its appeal across generations.Gap has also been optimizing its supply chain, improving inventory management and streamlining its store network, leading to reduced costs and improved margins. These operational advancements, coupled with a revitalized in-store experience, have contributed to overall sales growth and positioned the company well for continued success in the evolving retail landscape.GAP’s Strong FY24 OutlookThe company's stock momentum is bolstered by its raised fiscal 2024 outlook, driven by optimism surrounding its holiday collection. In fourth-quarter fiscal 2024, Gap is enhancing the shopping experience by refreshing its website and remodeling 15% of its stores. Strong performances in the third quarter and the early fourth quarter have strengthened Gap’s confidence, leading to an upgraded forecast for sales, gross margin and operating income growth.Gap anticipates sales growth of 1.5-2% for fiscal 2024, with a fourth-quarter sales rise expectation of 1-2%. The company forecasts a 220-basis-point (bps) improvement in the gross margin, thanks to favorable commodity costs and better inventory management. The fiscal fourth-quarter gross margin is expected to be similar to that reported last year. Operating income for fiscal 2024 is projected to rise 60-65% year over year, marking significant progress toward profit levels.Upward Estimate Trajectory for GAPThe Zacks Consensus Estimate for Gap’s fiscal 2024 and 2025 earnings per share rose 7.4% and 6.9%, respectively, in the last 30 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock. Image Source: Zacks Investment Research For fiscal 2024, the Zacks Consensus Estimate for GPS’s sales and EPS implies 0.8% and 41.3% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 2.1% and 6.6% year-over-year growth, respectively.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Gap Stock Looks UndervaluedThe company is currently trading at a discount to its industry on a forward 12-month P/E basis, making the stock an attractive pick for investors. Gap is currently trading at a forward 12-month P/E ratio of 11.62X, below the industry average of 20.68X and the S&P 500’s average of 22.75X.The stock also trades at a discount to its peers, including Abercrombie & Fitch ANF, Boot Barn BOOT and Deckers Outdoor DECK, which are trading at forward 12-month P/E multiples of 13.74X, 23.83X and 35.05X, respectively. Image Source: Zacks Investment Research Is the Stock Still a Buy?Gap has solidified its position in the retail apparel industry through a combination of brand strength, digital transformation, sustainability and global expansion. By focusing on product innovation, operational efficiency and a consumer-centric approach, the company is well-equipped to navigate the evolving retail landscape and emerge even more competitive.With strong financial health and operational discipline, Gap’s fundamentals remain robust. The recent uptick in its share price, paired with a valuation lower than many of its peers, presents an attractive opportunity for investors seeking a profitable apparel retailer. For existing shareholders, holding the stock offers promising long-term potential as the company continues executing its growth initiatives.Gap currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.Free Today: Profiting from The Future’s Brightest Energy SourceThe demand for electricity is growing exponentially. At the same time, we’re working to reduce our dependence on fossil fuels like oil and natural gas. 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