Jefferies Positive On The Gap Following Earnings, Wedbush Not So Much

Gap Inc GPS on Thursday reported its fourth quarter results. By Friday morning, several analysts offered their take.

Jefferies: It's ‘Simple'

In a report published Friday, Jefferies analyst Randal Konik wrote that his view of The Gap is "simple."

"We view the Gap through a prism of cash flow, which is predictable and robust," Konik wrote. "We see Old Navy and Athleta benefiting from secular tailwinds and the Gap brand improving again with easy compares providing an additional tailwind. Discounted valuation makes risk/reward here even more compelling."

Expanding on cash flow, Konik noted that the company can be considered a "cash flow machine" that enhances value for shareholders with a new $1 billion share repurchase announcement and dividend increases.

Konik also noted that The Gap will become even more focused on its direct channel and that many internal promotions will minimize "transitional hiccups." However, the analyst did mention that The Gap brand "clearly needs to get better."

Shares remain Buy rated with an unchanged $50 price target which "could prove conservative."

Wedbush: Shares Still Lack Catalyst

Morry Brown of Wedbush on Friday commented in a note that the timing of the turnaround at the main Gap brand "continues to hold the key" for shares to move higher, but the analyst did note that shares "feel closer to the bottom."

"New CEO Art Peck picked up where Glenn Murphy left off, discussing his disappointment with merchandise execution and operating performance at the Gap brand," Brown wrote. "While the assortment remains challenged, particularly in the tops categories (both knits and wovens), the company noted some signs of improvement within denim."

Brown noted that the company set its 2015 earnings per share guidance of $2.75 to $2.80 "well below" consensus estimates of $3.00, making the target "achievable."

Nevertheless, Brown concluded that with foreign exchange concerns and West Coast port challenge, sentiment remains pessimistic around the stock, especially since "we cannot point to a specific catalyst yet, but much of the bad news appears to be priced in."

Shares remain Neutral rated with a price target lowered to $45 from a previous $47.