Citi analyst Paul Lejuez upgraded Gap (GPS) to Buy from Neutral with a double price target of $24, up from $12. The stock closed Monday up $1.07 to $15.50. The company's ending of the planned Old Navy spinoff could imply its board is willing to take on corporate actions to unlock shareholder value, Lejuez tells investors in a research note.
And with the "favorable positioning" of athletic/casual retailers in a post-COVID world, Gap's Athleta brand "stands out as having a value that may not be getting recognized by the market," says the analyst.
At the midpoint of his valuation estimates, Lejuez estimates Athleta is worth $3.6BN on a standalone basis or in a sale. With Gap's current enterprise value at just $6.5B, a sum-of-the-parts analysis implies "big upside," says the analyst.
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