Final Recommendations

Analyzing the Models & Final Valuations

In the figure below shows the results from the Valuation Models that we have used for Post 8 and Post 9 to determine what the stock price of GAP Inc. is. The Free Cash Flow Model almost had the exact same value share as it was on April 29,2024 which is $21.47. The Residual Operating Income on the was slightly over the current stock price value of GAP Inc. but still relatively close to be included. The Market Multiples is only up around $6 but is still relatively close to the current stock price of GAP Inc. to be included. The Valuation Model that really stood out to us was the Dividend Discount which was very far off from the current stock price of GAP Inc. at over $15 less then what the current stock price is. Because of this we did not include to use it in the overall valuation. The issue with Dividend Discount is because it is used for mature companies that do not grow as rapidly because they have decided to pay out their investors instead in dividends. GAP Inc. is a company where a majority of their profits go back into growing the business.
Below in figure 1 if the valuation method was included it has a "1" next to it to include it in the average for the overall value estimate.

Figure 1: Four Valuation Methods used to determine GAP Inc. ValueSource: S&P Capital IQ, FactSet, Value Line

Justification & Investment Recommendation

Overall, after completing many different types of valuations and other key financial metrics I would recommend that GAP Inc. is an overall stock to HOLD. GAP Inc. has been a very stable position in the appeal retail industry with several well established brands. My Overall Value Estimate which was $24.43 is slightly over what the current stock price is of GAP Inc. These estimations still make the stock a little nervous to me because over the last couple of weeks there has seen a decrease in the stock value but consistently around the $20 range. In figure 4 it shows that a majority of analysts say to HOLD the stock.

Comparing Recommendations:

Figure 2 is a figure from FactSet showing the Targets & Ratings for GAP Inc. by each month for the past 12 months. Th estimated value for May of 2024 is $21.32. Over 50% of FactSet have said that GAP Inc. is a stock that investors should HOLD onto. Around 25% say that it could also possibly be a BUY.
Figure 3 is TipRanks which is used by E-Trade estimates the price to be in twelve months at a high, low, and middle. The average price that they have GAP Inc. over the next 12 months is at $22.69. These recommendations were made by 14 Wall Street Analysts. There estimates are a little lower based on the Value Estimation Methods that I used but 13 out of the 14 Wall Street Analysts believed that GAP Inc. is either a BUY or HOLD.
The last recommendation that was used was by Yahoo Finance who has the average price at $21.27 which is still a little below the average of my own Value Estimations. But consistently throughout all of the recommendations the majority of analysts have been saying that GAP Inc. is a stock that should be held onto rather than sell or buy.

Figure 2: FactSet Targets & Ratings for GAP Inc.Source: FactSet

Figure 3: Tip Ranks Next 12 Months Price Estimate for Texas Instruments Source: TipRanks

Figure 4: Yahoo Finance Analyst Price Target and Recommendation Trends for GAP Inc.Source: Yahoo Finance

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