Gap
Apparel retailer Gap Inc. (NYSE: GPS) has seen its share price plummet by about 64% over the past 12 months. Inventory bloat has hurt gross margins, and the company said it expects sales to drop by the high-single digits in the quarter. In April, the head of Gap’s Old Navy stores resigned, and in July, CEO Sonia Syngal abruptly left. Gap has shown little to indicate that it can get back on track. If it has nothing to say about how it plans to get untangled, investors are likely to be quite unhappy.
Analysts continue to be cautious on the stock, with 14 of 22 having a Hold rating and just two others rating the stock at Buy. At a share price of around $10.10, the stock has outrun its median price target of $9.00. At the high target of $26.00, the implied gain is almost 157%.
Second-quarter fiscal 2023 revenue is forecast to come in at $3.82 billion, up 9.9% sequentially but down 9.3% year over year. Analysts are forecasting an adjusted loss per share of $0.02, compared to a prior quarter loss of $0.44 per share and EPS of $0.70 in the year-ago quarter. For the full fiscal year ending in January, analysts currently expect EPS of $0.02 down more than 98%, on sales of $15.68 billion, down 5.9%.
Gap stock trades at 421.5 times expected 2023 EPS, 11.7 times estimated 2024 earnings of $0.86 and 9.9 times estimated 2025 earnings of $1.02 per share. The stock’s 52-week range is $7.79 to $29.30. Gap pays an annual dividend of $0.60 (yield of 5.94%), and the total shareholder return for the past year was negative 62.9%. That rich dividend yield may be in jeopardy.
Workday
Cloud application software maker Workday Inc. (NASDAQ: WDAY) has seen its share price retreat by about 35% over the past 12 months. Since posting a 52-week high in mid-November, the shares are down nearly 48%. When Workday posted quarterly earnings in late May, shares fell more than 7% after the company guided subscription revenue up slightly and suggested that its backlog could grow by 20%. Investors don’t want to know how much you can’t sell; they want to know how much you will sell.
Analysts remain solidly bullish on the shares. Of 35 brokerages covering the stock, 30 rate the shares at Buy or Strong Buy, and four more have Hold ratings. At a share price of around $157.70, the upside potential based on a median price target of $220.00 is 39.5%. At the high target of $282.00, the upside potential is 78.8%.
Revenue for the company’s second quarter of fiscal 2023 is pegged at $1.52 billion, up 5.9% sequentially and by 20.6% year over year. Adjusted EPS are forecast at $0.91, down 3.1% sequentially and 17.3% lower year over year. For the fiscal year ending in January, analysts currently expect Workday to report EPS of $3.41, down 14.5%, on sales of $6.2 billion, up 20.6%.
The company’s stock trades at 46.2 for the 2023 fiscal year, 35.2 times estimated 2024 earnings of $4.48 and 26.4 times estimated 2025 earnings of $5.97 per share. The stock’s 52-week range is $134.10 to $307.81. Workday does not pay a dividend, and the total shareholder return for the past year is negative 35%.
Originally posted at 24/7 Wall St.
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