27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
Gap Inc (NYSE:GPS) reported a fourth-quarter earnings beat and issued strong guidance in early March, but the stock's performance has remained relatively lackluster. This represents an entry point in a stock that's underappreciated by investors, according to a new sell-side report.
The Analyst
Rebecca Duval at Bluefin Research Partners. The firm has no investment rating on Gap.
The Thesis
An improving product assortment at the Gap over the past year has led to improved sales trends, store traffic and conversion activity, Duval said in a Monday report.
“In fact, the sentiment from our sources was so overwhelmingly positive about the current assortment, pipeline product, current sales trends and cost saving strategies that the retailer has in place for FY18, that we think GPS will be one of the most compelling specialty retail ideas in 2018."
The improvement was evident in Gap's Q4 earnings beat and improved guidance, Duval said, adding that she expects more beats down the line.
“What’s really exciting to us [are] the prospects for more earnings beat and upside tweaks as FY18 progresses. We think FY17 was just the beginning of a massive operational improvement that is taking shape at the Gap.”
Making up over 46 percent on the company’s sales, Old Navy is "on fire," Duval said.
Over the last two years, the Gap brand has enacted initiatives intended to meet consumer demands, including a data-driven test and react strategy, more "fashion-forward" features and an inventory management system, according to Bluefin.
The retailer's cost cuts are just now beginning to pay off, Duval said.
"Some of the cost-cutting initiatives are more obvious than others, like store closures and headcount reductions," the analyst said. Gap's "less obvious" streamlining activities are underappreciated by investors and are likely to provide further upside to earnings estimates in the second half of the year, she said.
Price Action
Gap shares were up 0.31 percent at $32.32 at the close Tuesday.
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27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
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