Gap is emerging as a winner in the post-pandemic retail world, according to Deutsche Bank. Analyst Gabriella Carbone upgrade the retail stock to buy from hold, saying in a note to clients Monday that the company's fundamentals were improving on several fronts. Deutsche hiked its Gap price target to $42 per share from $38. The new target is 44% above where the stock closed Friday. "We believe volatile trends are now largely behind the company and see a path to consistent [earnings before interest and taxes] margin gains, largely driven by a reduction in fixed costs, ... the mix shift to higher-margin and growth businesses (Old Navy and Athleta), improved profitability at the Gap brand with increasing consumer engagement, and demand generation investments driving market share gains," the note said. The stock could also be a winner when back-to-school spending comes into focus as summer winds down. "Given Old Navy's steady performance in the kids' category and growth recently, we believe the company is positioned well to take advantage of the back-to-school season this year driven by robust consumer demand," the note said. Shares of Gap have outperformed the broader market in 2021 but have stumbled recently, falling 13% in the past three months. -CNBC's Michael Bloom contributed to this report.
A Gap store in New York, August 2, 2020.
Scott Mlyn | CNBC
Gap is emerging as a winner in the post-pandemic retail world, according to Deutsche Bank.