Thanks to restructuring efforts and improved supply chain conditions, apparel retailer Gap Inc. managed to exceed expectations and report a first-quarter profit of one cent per share.
Following the news, Gap’s shares (NYSE:GPS) rose by 12.1% to trade at $8.32. Despite falling short of revenue expectations and receiving three price target cuts, including one from UBS which slashed its earlier estimate from $7 to $6, the stock remained resilient.
However, the majority of analysts covering GPS remain bearish towards the company, with 12 of the 13 analysts surveyed recommending that investors hold or sell their shares. Short interest also increased by 6.4% in the latest reported period, with the 31.45 million shares sold short accounting for 17.5% of the available float.
While pain continues to be felt in shares of GPS, the stock is currently bouncing back after a three-year-low of $7.22. With the possibility of its first close above the 20-day moving average in over a month, pressure at the $8.80 mark is seen by some as keeping this rally in check. The stock has so far notched up declines of 27% in 2023.
Options traders appear more optimistic than analysts. GPS’ 50-day call/put volume ratio of 2.58 is up 97% from its annual range and indicates optimism regarding the stock’s future prospects.
With today’s report seeing options volume running at eight times the usual average, the most active options positions were found to be the weekly 5/26 7.50 put, which expires at close of market.
