Friday, May 22, 2009

Update on the Gap

AlphaNinja shared some some upbeat thoughts on the Gap (GPS) yesterday afternoon, after the company reported decent numbers. The street agrees, as the consensus earnings numbers are being increased to where AlphaNinja sees them.

from breifing:

"FBR Capital notes last night GPS reported 1Q09 EPS of $0.31, vs their est of $0.31 and consensus at $0.30. Recall that on May 8, the co guided 1Q09 to range of $0.29 to $0.30 on a GAAP basis. Additionally, the co's guidance implied a 2Q09 EPS above the Street consensus of $0.25. On the call, mgmt noted that Old Navy's turn is progressing, and that it expects to see improvement at Gap in 2H09. FBR continues to commend mgmt for its ability to cut costs and believe the results are apparent. FBR believes that Old Navy has shown signs of improvement, but they continue to look for the evidence that the turn is underway at Gap, and they remain concerned about sluggish trends at the Banana Republic division. FBR expects comps to remain negative in FY09. Firm is raising their FY09 est to $1.24 from $1.17, vs consensus of $1.18, and their FY10 est goes to $1.31 from $1.20, vs the Street at $1.26... Jefferies notes two major positives from the qtr: 1) Old Navy is turning, and 2) cost savings continue. These themes will keep an upward bias to EPS. They believe management is taking the necessary steps in product and marketing direction at Gap and Banana to help stem the bleeding and look for some traction from strategies later this year. Coupled with a war chest of cash and strong cash flow, firm still sees significant appreciation left in GPS shares. Their tgt moves to $21 from $20 giving ~30% upside from current levels."

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