Stock Recommendation: Gap Inc. (NYSE:GPS)

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By Jacob Maslow

gap in seattleGap Inc. (NYSE:GPS) has always been a trendy fashion brand in the United States. It has a unique blend in terms of market appeal. On one hand, it has a hip factor that it has cultivated through clever ads. On the other hand, its pricing is quite manageable for most middle class Americans. This is the traditional Gap formula that has resulted in quite a bit of success for its stock.

Well, if you are a firm believer in the old investment adage of “buy on bad news, sell on good news”, then it is a good time for you to take a long hard look at Gap Inc. for a potential purchase. The company recently posted a surprise sales decline. While it still made money, its February sales of its Banana Republic and Gap Global stores declined by 4%. The consensus estimates among analysts was that its same store sales would actually increase by 1.4%. This is a great indicator that this company might be a good purchase because its overall numbers are still quite rosy and optimistic.

There are sure to be investors who are looking for an excuse to sell the stock. Based on its February numbers, they will get that justification. After all, Gap brand sales dropped by 7% while its Banana Republic line saw a 5% decline. The only good news, if you want to call that good news, is that the Old Navy business reported flat sales. All told, total sales dropped by $11 million to $918 million.

This is a great buying opportunity for Gap if you play the stock right. Of course, you shouldn’t automatically just go out there and buy Gap Inc. shares. Take a look at the intraday dips to see if there are any opportunities there. Consider yourself warned. The market currently is overbought. Be very careful of intraday traps. Gap is quite attractive, but you have to get in at the right price.

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