When you think of Gap (NYSE: GPS) the words luxury, status, and fashion-edge clothing probably do not come to mind. However, the retail perception of Gap could radically change after they announced a partnership with Kayne West. Investors and clothing enthusiasts are extremely excited about the partnership. However for those sitting on the fence or just hearing about the news are wondering whether they should invest? Let us get to the bottom of this investing dilemma today.
Table of contents 1. Why is YEEZY-GAP receiving a lot of hype? 2. What is the best strategy to take on GPS?
Why does the deal have GPS investors bullish?
The mutli-year partnership involves Kanye West opening up a Yeezy Gap line. The line will consist of hoodies, T-shirts and off course joggers. Gap expect the Yeezy collection to be available to the market in 2021.
Investors instantly interpreted the partnership as an increase in revenue in long-term. However, with the GAP-YEEZY partnership having a long-term benefit, why the short term spike?
First, positive announcements, even if their benefits will not come to fruition until the long-term, usually cause volcanic surges on the day. Because they signify positive progression in the company. Thus, many long-term and short-term investors cemented their position on Friday, ultimately triggering the bullish activity.
Second, the deal transcends beyond a simple increase in GAP’s financials. The partnership signifies an insurgence of hope for the suffering retailer. Because the word YEEZY is more than just a brand. We do not have to look much further than the Adidas Yeezy partnership to understand the bigger picture. Humans crave creativity, innovation, and exclusivity. Well YEEZY provides all three desires in one product. It does not matter whether you are at the grocery store, on public transport, or at just at home. Because with YEEZIES you are apart of an innovative, creative and exclusive segment of society. Hence, the perception of the YEEZY-GAP line will significantly boost the perception of GAP.
Should you invest in GPS?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short answer: Potentially yes, however, the short term investors sucked the quick gains dry (opinion not advice).
Investing in the GPS hype
The most sought after strategy when hearing about price-sensitive news is to ride the wave. However, it seems the crest of the GAP wave is slowly coming down. Do not get me wrong, we could see green at the bell on Monday. However, the green in your GPS shares could instantly change red after minutes of purchasing
Also, the underlying fear of rising COVID-19 cases is causing panic to creep through the cracks of the stockmarket. Thus, the continued market sell-off and pump and dump like trading indicate the window for quick gains is closed. If you do decide to trade on the hype, set up an exit point, and a stop loss to mitigate the risk of the wave crashing on you.
In today’s age long-term investing might seem boring as it does not offer the instant gains (gratification) that comes with riding the trend. However, taking a long-term approach might be the best investment strategy for GPS. Because COVID-19 and a recession should deal a huge blow to the financial health of GAP. Also, the YEEZY GAP line is not launching until 2021. Meaning GAP’s financial situation and brand perception will not turnaround in the imminent future. Thus, getting in off the expected bearish activity this week could be a smart idea. (opinion not advice).
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.