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Gap (GPS) Moves 7.6% Higher: Will This Strength Last?

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Gap (GPS - Free Report) shares soared 7.6% in the last trading session to close at $27.31. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 14.6% gain over the past four weeks.

The Gap stock moved higher on strong fourth-quarter and fiscal 2020 results as well as an optimistic fiscal 2021 view. The company continued to witness robust digital sales that almost offset the declines in in-store sales, resulting in flat comparable sales results in the fiscal fourth quarter. Management was impressed by strong gains at the Old Navy and Athleta brands, while weakness in the Gap and Banana Republic brands continued. The company expects the pandemic-led impacts to persist in the first half of fiscal 2021 and ease out by the second half. The company expects adjusted earnings of $1.2-$1.35 and sales growth of mid- to high-teens for fiscal 2021. Also, the company’s Power Plan 2023, which essentially focuses on strengthening the Old Navy and Athleta brands, looks quite encouraging.

Price and Consensus

Price Consensus Chart for Gap

This clothing chain is expected to post quarterly loss of $0.13 per share in its upcoming report, which represents a year-over-year change of +94.8%. Revenues are expected to be $3.42 billion, up 62.2% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Gap, the consensus EPS estimate for the quarter has been revised 34.8% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on GPS going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank 3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>


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