The Gap Inc. - UW Stock Pitch Competition

Report
The Gap Inc.
Michael Yang
Lemons LLP
Executive Summary
• Strong multi brand platform
• Valuation
• Continued global expansion
BUY
52 wk
P/E
EV/EBITDA
DCF
30
40
50
60
70
80
90
Lemons LLP
Overview
• Global clothing and accessories retailer founded
in 1969 in San Francisco.
• Largest speciality retailer in US
• 135,000 employees and 3,076 stores worldwide
Lemons LLP
Industry Outlook
•
•
•
•
Consumer empowerment is quickly decreasing brand loyalty
Fast fashion continues to be the dominant strategy
Consumers spend through multiple channels
Increased discounting to drive sales
Lemons LLP
Competitive Advantage
“Wear our passion”
Innovative designs
Margin maximization
Focused branding
Socially responsible
Global Expansion
Lemons LLP
Key Facts
Customers: Gap brands appeal to the entire market while
focusing on trendy twists of classic designs for all ages while
focusing on 18 to 35
Products: Gap leverages multiple price points to maximize
price potential of products to avoid sale merchandise
Competitors: Gap’s fresh designs avoid isolating any
consumer or focusing on single markets
Catalysts:
• Old Navy in China
• Foothold in Brazil
• Development of Intermix and Athleta
Lemons LLP
Stock Performance
S&P500
Lemons LLP
DCF Valuation
Revenue (2018)
5 year Rev. CAGR
19,774M
1,255
1,031
5%
855
Gross Margins
47%
588
WACC
9.64%
278
Enterprise Value
23,212M
Equity Value
22,009M
2013E 2014E 2015E 2016E 2017E
Discounted Cash Flow Value of $49.47
Lemons LLP
Investment Risk
•
•
•
•
•
Falling out of favour
Failure to expand into global markets
Increased operating costs
Shrinking margins
Failure to adapt to trends
Lemons LLP
Recommendation
Product
Offerings
Target
Price
$50
Global
Expansion
Valuation
22.6% Growth in 12 months
Lemons LLP

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