Gap Stock Price and Forecast: Why is GPS down 20%? Is $5 the next target?

The Gap (GPS) stock fell pretty heavily afterhours on Monday as it reported earnings. The numbers were disappointing with earnings per share (EPS) coming in at $0.27 versus the $0.50 estimate. Revenue was also behind estimates, coming in at $3.94 billion versus $4.44 billion expected. The shares immediately dumped, falling over 20%. The Gap quote at the time of writing is $18.57, a loss of 21%. 

GAP Inc chart, 5-minute

Gap (GPS) stock news

We have mentioned the top and bottom line numbers above, but in addition Gap also lowered forecasts due to supply chain issues. Those words have been hitting investors this year, and Gap made a huge reduction to its FY adjusted EPS guidance. This was at $2.10-$2.25 previously, but now Gap guides it at $1.25 to $1.40. This is a huge drop as COVID-19 factory closures in Vietnam have hit Gap especially hard. Gap gets about 30% of its supplies from Vietnam. The downgrades and price target changes are coming in thick and fast this morning with Goldman, Credit Suisse, Wells Fargo, Telsey, Deutsche and B.Riley all lowering their price targets for Gap, while JPMorgan downgraded the stock.

Gap (GPS) stock forecast

Gap had already been struggling and trading in a down channel, but now it has exploded out of that. It was already below the yearly Volume-Weighted Average Price (VWAP), as well as 100 and 200-day moving averages, so trying to buy this one was going against the technical picture. We see no let-up in sight, with $18 being a large support zone going back on the weekly chart. This shows the large volume area until $16. If Gap gets below that, then single figures will surely beckon, not to mention a test of the pandemic lows at $5.26. There is interim support at $12 along the way. 

GPS 1-day chart