03:21 PM EDT, 05/28/2024 (MT Newswires) -- Gap (GPS) is expected to miss its fiscal Q1 earnings target as the company's markdowns have been "much heavier than expected," UBS said in an earnings preview Tuesday.

The firm said it anticipates the company to post Q1 earnings of $0.07 per share -- 7 cents below the consensus estimate. It also expects Gap to offer Q2 guidance below consensus.

"The market is expecting a beat on sales, but is missing the impact of heavier discounts on margins," UBS said.

The firm added that based on options prices, the company's stock could move 14.5% in either direction over Q1 results compared to Gap's historical average earnings day move of 6.5%.

UBS said it expected less volatility than 14.5% in either direction.

The firm has a Sell rating on the stock with a $9 price target.

Gap shares were down nearly 3% in recent trading.

Price: 20.38, Change: -0.60, Percent Change: -2.86