Gap: More Upside Ahead After Spin-Off Announcement

About: The Gap, Inc. (GPS)
by: Vince Martin
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Vince Martin
Long/short equity, value, gambling

GPS soared after the company announced it was spinning Old Navy.

The reaction is somewhat surprising: it was already clear that GPS was an Old Navy story.

The gains only get GPS back to past levels - which were, and are, too low.

The bull case still holds: Old Navy supports the entire value of the current business, leaving valuable Athleta and two turnarounds available for free.

I'm more than a little bit confused by the huge reaction that greeted Gap (GPS) stock after the company announced its plans to spin off Old Navy. The company's decision does make some