Gap Stock Rises 9% in a Month: Should You Buy Now or Wait?

Gap, Inc. GAP has shown impressive growth recently, with its stock appreciating 9.4% in the past month. This performance outpaces the industry’s growth of 2.8% and the S&P 500’s 2.4% growth. Several factors, including lower commodity costs and improved promotional activity, have driven this stock's outperformance.Image Source: Zacks Investment ResearchGAP’s current stock price of $22.50 reflects a 26.4% discount to its 52-week high of $30.59. The technical indicators show that the stock is trading above both its 50- and 200-day moving averages, indicating strong upward momentum and suggesting sustained investor confidence in the company's performance.Image Source: Zacks Investment ResearchOne of the most crucial factors driving Gap's upswing is its focus on cost management, improving inventory control and enhancing profitability. By streamlining operations and reducing inefficiencies, the company aims to maintain financial discipline and strengthen its balance sheet.For investors, the decision on whether to lock in gains, hold or remain bullish on GAP depends on several factors.GAP Stock’s Growth Strategy Fueled by Brand StrengthGap is working on revitalizing its core brands, including Gap, Old Navy, Banana Republic and Athleta, through innovative marketing strategies and product improvements. By aligning each brand with clear value propositions, the company aims to re-engage existing customers and attract new ones.The company’s flagship brand is showing strong momentum, with five consecutive quarters of market share gains and seven quarters of share growth in the women's segment. Management plans to further leverage its strength in denim while enhancing both in-store and online experiences with dynamic new campaigns. Growth in the Kids category is also encouraging, suggesting a well-rounded appeal across demographics.For Banana Republic, management is focused on re-establishing the brand in the premium lifestyle space by fixing fundamentals, assortment architecture, pricing and operational efficiencies. The company is encouraged by stability across the brand’s men's business with the depth of wardrobe and a differentiated style. It concentrates on women's units with better assortment planning and a focus on major items.Gap is resetting the Athleta brand, which has significant growth potential, thanks to its unique positioning around women's empowerment and fitness, branded as the Power of She. The company is broadening its customer base and is seeing better sell-through at full price, indicating that its marketing and merchandising strategies are resonating with consumers.More on GAP StockGap remains on track with its aggressive cost-management actions. The company is making efforts to simplify and optimize its operating model and structure, including increasing spans of control and decreasing management layers to improve the quality and speed of decision-making, as well as creating a consistent organizational structure across all four brands.These actions are expected to generate $300 million in annualized savings. The company is also likely to incur severance and other related costs from the optimization plan. The company is focused on actioning more than $550 million in annualized cost savings, realizing margin expansion on lower air costs, improved discounting and effective sourcing strategies.With robust results in the second quarter of fiscal 2024, Gap raised its outlook for gross margin and operating income growth while maintaining its net sales and operating expense guidance for the year. The company expects gross margin expansion of at least 200 basis points (bps), driven by nearly 100 bps of benefit from lower commodity costs and disciplined inventory management.Operating income is projected to grow in the mid-to-high 50% range, reflecting Gap's improved operational efficiency and cost management efforts. These factors are likely to bolster the company’s profitability for fiscal 2024.Upward Earnings Estimate Revisions Signal Confidence in GAPReflecting the positive sentiment around Gap, the Zacks Consensus Estimate for earnings per share (EPS) has seen upward revisions. In the past 60 days, analysts have increased EPS estimates by 5.6% to $1.88 for fiscal 2024 and by 4.1% to $2.02 for fiscal 2025. These estimates indicate expected year-over-year growth rates of 31.5% and 7.5%, respectively.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Image Source: Zacks Investment ResearchGAP Stock’s Attractive ValuationGap is currently trading at a price-to-earnings multiple of 11.38x, below the Zacks Retail - Apparel and Shoes industry multiple of 16.72x. The stock is undervalued compared with its industry peers, offering compelling value to investors looking for exposure to the retail apparel sector. GAP's Value Score of A underscores its appeal as a potential investment.Investment Guidance on DECK StockGAP has performed well on bourses driven by the success of key brands, including Gap, Old Navy, Banana Republic and Athleta, along with its cost-management actions. The company also presents a compelling investment case, driven by a combination of its undervalued position relative to industry peers and strong growth fundamentals.While its forward P/E ratio suggests potential undervaluation, Gap’s focus on improving inventory control and enhancing profitability strengthens its outlook. With robust strategies in place to enhance margins, GAP is well-positioned for sustained long-term growth, making it a stock worth considering for investors seeking opportunities in the retail sector. The company currently holds a Zacks Rank #2 (Buy).Three Other Picks You Can't MissWe have highlighted three other stocks in the broader sector, namely Abercrombie & Fitch Co. ANF, The Kroger Co. KR and Burlington Stores BURL.Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.The Zacks Consensus Estimate for ANF’s current financial-year sales and earnings indicates growth of 13% and 63.4%, respectively, from the year-ago reported figures. Abercrombie has a trailing four-quarter earnings surprise of 27.9%, on average.Kroger, a renowned food retailer, currently carries a Zacks Rank #2. KR has a trailing four-quarter average earnings surprise of 8.2%.The Zacks Consensus Estimate for Kroger's current fiscal sales and earnings indicates a decline of 0.9% and 6.3%, respectively, from the year-ago reported figure.Burlington Stores is a nationally recognized off-price retailer of high-quality, branded apparel, footwear, accessories and merchandise for the home at everyday low prices. It currently carries a Zacks Rank #2. BURL has a trailing four-quarter earnings surprise of 18.4%, on average.The Zacks Consensus Estimate for Burlington Stores’ current financial-year sales and earnings suggests growth of 10.1% and 30.5%, respectively, from the year-ago reported numbers.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report The Kroger Co. (KR): Free Stock Analysis Report The Gap, Inc. (GAP): Free Stock Analysis Report Burlington Stores, Inc. (BURL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks