Gap Gets JPMorgan Vote of Confidence With Higher Price Target

Gap (GPS, Financials) may be turning a corner. JPMorgan on Friday stuck with its overweight rating and nudged its price target up to $32, suggesting nearly 48% upside for the retailer's shares.

The move came right after Gap's latest quarterly update, which was a mixed bag. Second-quarter comparable sales rose just 1%, leaving investors underwhelmed and the stock down in after-hours trading. Shares edged higher again by Friday morning.

CFO Katrina O'Connell told JPMorgan that things looked better in July, with sales picking up as the back-to-school rush kicked in. That momentum carried into August. JPMorgan's team figures July comps ran mid-single digits and thinks comparisons later this fall will be easier, since last year's bad weather weighed on results.

Analyst Matthew Boss wrote that CEO Richard Dickson has the playbook in place across Gap's brands. He sees room for steady sales growth, operating margins working back toward 8% to 10%, and modest gross margin improvement.

Gap shares are still down about 8% for the year, but JPMorgan's call suggests the Street could be more optimistic heading into the holiday stretch.