Goldman Sachs analyst Brooke Roach reiterated the Buy rating on Gap, Inc. ( GAP ) , raising the price forecast from $25 to $28.

On Thursday, the firm reported first-quarter earnings of 51 cents per share, which beat the consensus estimate of 45 cents.

Quarterly revenue came in at $3.46 billion, which beat the Street estimate of $3.42 billion. Gap has reaffirmed its full-year 2025 guidance, excluding any potential tariff-related impacts.

While core business trends remain solid, the analyst highlighted that the investor sentiment may have been tempered by heightened expectations and Gap’s acknowledgment of a larger-than-expected tariff headwind in the second half, even after mitigation, estimated at $100 million to $150 million.

Also Read: Gap Stock Is Falling Friday: What’s Going On?

Gap continues to shift its sourcing strategy to reduce exposure to China. The company expects less than 3% of its products to come from China by the end of 2025, down from under 10% in 2024.

By the end of 2026, Gap aims to ensure no single country accounts for more than 25% of its sourcing.

The estimated unmitigated tariff impact stands at $250 million to $300 million, while mitigation efforts could bring that down to $100 million to $150 million. However, this range is not formally included in the company’s current outlook.

Gap is using standard mitigation levers such as adjusting sourcing, manufacturing, assortments, and negotiating with vendors, but does not plan to raise prices in response to the tariff risk.

Despite the uncertainty, the company is continuing to invest in key strategic initiatives and intends to reinvest a portion of its projected FY25 cost savings to support its growth plans.

While the analyst has reduced Gap’s second-half forecasts due to higher-than-expected tariff headwinds and expects this to weigh on the stock in the near term, Roach remained confident in the company’s ability to manage these challenges into FY26 using additional “mitigatory levers,” including the “unused option” of pricing.

The analyst added that Gap has additional mitigation tools available, including the option to adjust pricing, which it has not yet utilized.

Roach stated that their 2025, 2026, and 2027 EPS estimates have been revised to $2.19, $2.34, and $2.61, compared with the previous forecasts of $2.28, $2.37, and $2.61.

The update reflects Gap’s strong first-quarter performance and incorporates the latest tariff guidance provided by management, the analyst said in the note.

Price Action: GAP shares are trading lower by 18.2% to $22.87 at last check Friday.

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