Gap Earnings: Good Feelings Abound as Dickson’s Plans Bring Quick Results; Shares Fairly Valued

No-moat Gap’s shares soared 23% in May 30 postmarket trading as first-quarter sales and profitability surpassed expectations despite uneven consumer demand for apparel. Although CEO Richard Dickson has a lot of work to do to generate consistent sales growth at each of Gap’s four brands while operating more efficiently, his personnel, product, and operating changes have already reinvigorated a company that had been floundering for years. We expect to lift our $24 fair value estimate on Gap’s shares by a high-single-digit percentage, but they are fully valued after the move.