The stock has risen nearly 8% this year, building on the 85% surge it saw in 2023 when it brought in former Mattel (MAT.O) executive Richard Dickson as its new CEO to revive its struggling business.
It has tried to improve its business by introducing more fashionable styles across its brands while ramping up marketing efforts to appeal to picky shoppers, who have otherwise scaled back on non-essential purchases.
"(The CEO's) personnel, product, and operating changes have already reinvigorated a company that had been floundering for years," said Morningstar's David Swartz.
Gap's eponymous brand posted a 3% comparable sales growth in the first-quarter, while the Old Navy and Athleta banner posted 3% and 5% increases, respectively.
"Just one quarter into the fiscal year, the company raised its annual outlook, a solid sign that green shoots at the brands are taking root," Telsey Advisory Group's Dana Telsey said.
The average rating of 20 analysts on Gap is "hold", with a median price target of $23, according to LSEG data. As many as 10 brokerages lifted their price targets on Friday.
Gap's median price-to-earnings multiple (P/E) for the next 12 months, a common benchmark for valuing stocks, is 14.66, above the industry median of 12.57.
Retailers including Walmart (WMT.N) and Target (TGT.N) have indicated in their recent results that apparel demand has begun to pick-up after a slowdown last year.
Gap has gained share in a competitive market where the consumer remains extremely choosy, said Mari Shor, an equity analyst at Columbia Threadneedle Investments.
