Gap Inc (NYSE:GPS) shares added nearly 7% on Thursday following an upgrade from UBS, which raised the retailer’s rating from to ‘Buy’ from ‘Neutral’ and increased its price target to $41 from $26.
The move reflects UBS’s confidence in Gap’s ongoing turnaround under CEO Richard Dickson. The analysts cited Gap’s “reinvigoration playbook,” noting that the company is moving from inventory cleanup toward accelerated growth.
The firm forecasts fiscal 2026 revenue growth of 4.4%, more than double last year’s estimate, supported by seven consecutive quarters of positive comparable sales and a third quarter earnings beat of $0.62 per share.
Key drivers highlighted by UBS include the stabilization of core brands such as Old Navy, the growth potential of Athleta, and the premium repositioning of Banana Republic.
The firm also expects expansion into higher-margin beauty and accessories categories to help boost profitability and reduce exposure to apparel cyclicality.
UBS highlighted Gap’s competitive positioning, suggesting the retailer could recapture market share from peers like American Eagle and Abercrombie through refreshed aesthetics and celebrity partnerships. Investments in AI technology through a partnership with Google Cloud are expected to improve supply chain efficiency and enhance customer experience.
In addition, UBS noted the potential impact of share repurchases on earnings, modeling annual buybacks of roughly 3% of shares outstanding in fiscal 2026, up from less than 1% previously.
The analysts also raised their earnings estimates for 2026 and 2027 above consensus and increased the assumed valuation multiple to 14 times earnings, reflecting expectations of a more durable growth profile.