Gap Stock Volatile After Earnings Miss

The shares of Gap Inc. (NYSE: GPS) are trading on both sides of the aisle today, last seen at $12.14, after the retail company reported a steeper-than-expected first-quarter loss as well as revenue that came in lower-than-anticipated. The company's quarterly loss of nearly $1 billion is due to stores closing during the coronavirus outbreak. Nevertheless, no fewer than seven brokerages upped their price targets, including to $13 from $11 at J.P. Morgan Securities.

It has been a difficult week for Gap -- on Tuesday, Simon Property Group sued the retailer for more than  $64.9 million in missed rent and overdue charges. On the charts, GPS is still trying to fully recover from its early-April lows near $5.30, when most stay-at-home orders were already in effect and nonessential businesses were closed across the country. And yet in February, shares were pushing against the $19 level, comparatively lower to the stock's high off $31.39 in early 2019. Although GPS was able to find solid support at the 20-day-moving average in May, the equity remains down over 30% year-to-date.

Coming into today, analysts had been skeptical of GPS. Of the 17 in coverage, 14 sport a tepid "hold" recommendation, while the remaining three carry a "sell" or worse. Meanwhile, the stock's consensus price target of $9.92 is a 15% discount to current levels. In other words, today's flurry of bull notes should have come as no surprise.

Shorts are building up their positions, so an exodus of these bearish bets could fuel additional gains. In the most recent reporting period, short interest rose by 25.24%. The 41.19 million shares sold short represents a hefty 20% of the stock's available float, and nearly three and half times its average daily volume.