Gap (GAP) reported a mixed Q2 performance, with momentum at Gap brand offset by uncertainty at Old Navy, BofA Securities said in a Friday note.

"We are encouraged by momentum at Gap but remain

concerned that Old Navy's lower-end customer will continue to be pressured by the tough macro climate," the note said.

While comparable sales grew 10% at Gap, Old Navy recorded a 4% decline, driven by seasonal product that didn't resonate and a marketing campaign that failed to drive traffic, the note said.

Looking ahead, the report said Old Navy entered Q3 with "cleaner" inventory levels and is seeing a positive response to its Fall product line, resulting in improved trends in August.

BofA kept its neutral rating while raising its price target to $27 from $26 on the back of higher earnings estimates.

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