Abercrombie & Fitch (ANF) is likely to miss Q1 earnings estimates due to banner deceleration and higher promotional activity, Morgan Stanley said Tuesday in a retail report.

"While this disappointing print may be somewhat offset by a potentially more modest FY guidance reduction than peers due to ANF's relative tariff insulation, nonetheless we think it fuels the bear case narrative," the report said.

"Current depressed valuation seemingly appropriately weights these dynamics," it added. Morgan Stanley cut its ANF price target to $78 from $114 while keeping its equalweight rating.

The report said Bath & Body Works (BBWI) and Gap (GAP) are among the few stocks in its coverage where the quarter could be a positive catalyst. Both firms were kept at overweight ratings.

"We anticipate 1Q EPS outperformance & a possible '25e guidance reiteration (or at last a smaller reduction than peers),"

Morgan Stanley said. It cut its price target to $43 from $49 for Bath & Body Works and to $27 from $30 for Gap.

Price: 69.47, Change: +0.03, Percent Change: +0.04