What The Gap Upgrade Means for Mutual Fund Investors (GPS)

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What The Gap Upgrade Means for Mutual Fund Investors (GPS)

Shauna O'Brien

|

The Gap Storefront
Before the opening bell on Monday, Jefferies boosted its rating on The Gap (GPS). Here’s what the move means for mutual fund investors.

Inside the Analyst Move

Jefferies has upgraded The Gap from “Hold” to “Buy” and has named the stock its “best new idea” for 2015.

According to analyst Randal Konik, the company’s catalysts include:

  • Strong momentum in its Old Navy segment.
  • Sourcing cost tailwinds from cotton prices are at five-year lows.
  • Free cash flow accelerates as cap ex/sales ratio lowers.
  • The company’s brand remains relevant

Fairly Valued, with Several Potential Catalysts

From a valuation standpoint, GPS is fairly valued. There are also several catalysts and opportunities with this stock, including potential buybacks and lower commodity prices. A private equity deal could be possible in the future, although the company may be too expensive to spark interest.

Mutual Funds to Watch

Investors interested in GPS may also be interested in the funds listed below. These funds currently have the largest stakes in the company.
Symbol Mutual Fund Stake
{% mutualfund VTSMX %} Vanguard Total Stock Market Index 0.95%
{% mutualfund VFINX %} Vanguard 500 Index 0.69%
TRMCX T. Rowe Price Mid-Cap Value 0.36%

The Bottom Line

The funds above allow investors to gain exposure to GPS while remaining diversified. Investors interested in The Gap may also be interested in L Brands (LB) and The Buckle (BKE).

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The Gap Storefront

What The Gap Upgrade Means for Mutual Fund Investors (GPS)

Shauna O'Brien

|

Before the opening bell on Monday, Jefferies boosted its rating on The Gap (GPS). Here’s what the move means for mutual fund investors.

Inside the Analyst Move

Jefferies has upgraded The Gap from “Hold” to “Buy” and has named the stock its “best new idea” for 2015.

According to analyst Randal Konik, the company’s catalysts include:

  • Strong momentum in its Old Navy segment.
  • Sourcing cost tailwinds from cotton prices are at five-year lows.
  • Free cash flow accelerates as cap ex/sales ratio lowers.
  • The company’s brand remains relevant

Fairly Valued, with Several Potential Catalysts

From a valuation standpoint, GPS is fairly valued. There are also several catalysts and opportunities with this stock, including potential buybacks and lower commodity prices. A private equity deal could be possible in the future, although the company may be too expensive to spark interest.

Mutual Funds to Watch

Investors interested in GPS may also be interested in the funds listed below. These funds currently have the largest stakes in the company.
Symbol Mutual Fund Stake
{% mutualfund VTSMX %} Vanguard Total Stock Market Index 0.95%
{% mutualfund VFINX %} Vanguard 500 Index 0.69%
TRMCX T. Rowe Price Mid-Cap Value 0.36%

The Bottom Line

The funds above allow investors to gain exposure to GPS while remaining diversified. Investors interested in The Gap may also be interested in L Brands (LB) and The Buckle (BKE).

Sign up for Advisor Access

Receive email updates about best performers, news, CE accredited webcasts and more.

Popular Articles

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Why 30 trillion is invested in mutual funds book

Download our free report

Find out why $30 trillon is invested in mutual funds.

Read Next

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