The Gap, Inc. (GAP): A Bull Case Theory 

We came across a bullish thesis on The Gap, Inc. on wallstreetbets subreddit by PaperHandsTheDip. In this article, we will summarize the bulls’ thesis on GAP. The Gap, Inc.’s share was trading at $21.74 as of October 2nd. GAP’s trailing and forward P/E were 9.33 and 9.22, respectively according to Yahoo Finance.

Gap Inc. (GAP) is currently trading at a P/E of ~9.5, signaling either undervaluation or underlying issues. Compared to peers like Lululemon (12x) and American Eagle (16.5x), GAP’s discount appears notable. The company maintains a stable dividend (~3%) and is a recognized brand with a long history, suggesting resilience despite questions about its relevance. The executive team, led by CEO Richard Dickson—formerly of Mattel—has a proven track record of brand revitalization, and guidance has been conservative, likely leading to consistent beats over the past eight earnings reports.

A key catalyst is GAP’s recent ad campaign, launched on August 19, which has already gone viral. TikTok and YouTube impressions exceeded hundreds of millions, driving an initial 8.5% increase in foot traffic and a surge in online search terms linked to purchasing intent by 200-500%. Early indicators suggest the campaign is resonating with younger demographics, potentially restoring cultural relevance in a manner similar to American Eagle’s successful campaigns. While the company has not yet provided concrete sales data, the trend signals strong upside potential heading into the next earnings release.

Market risks such as tariffs, insider selling, and claims of brand irrelevance have been largely priced in or appear overstated. The executive team remains committed to growth, and operational performance across Old Navy, GAP, and Banana Republic is stable. Using a P/E multiple of 12, a realistic price target is ~$27.5–28, reflecting upside from both the ad campaign and potential organic growth. Given low current investor attention, GAP presents an opportunity with limited downside, a favorable risk/reward profile, and the potential for significant market re-rating if the upcoming earnings confirm positive trends.

Previously we covered a bullish thesis on Urban Outfitters (URBN) by Value Don’t Lie in September 2024, which highlighted its strong brand portfolio, attractive valuation below 12x P/E, and robust free cash flow. The company’s stock price has appreciated approximately by 106% since our coverage. The thesis still stands as fundamentals remain solid. PaperHandsTheDip shares a similar perspective but emphasizes GAP’s viral ad campaign and cultural rejuvenation.

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Disclosure: None.