Nomura Securities Initiates Coverage on The Gap at “Neutral” (GPS)

Nomura Securities announced on Monday that it has started coverage on apparel retailer The Gap Inc. (GPS).

The firm has initiated coverage on GPS with a “Neutral” rating and $42 price target. This price target suggests a 4% increase from Friday’s closing price of $40.39.

Analyst Simeon Siegel commented: “With top- and bottom-line resurgence, there is no question this has been the year (and-a-half) to own The Gap (GPS). But interestingly, FY12 total sales were still below FY04 levels, suggesting that through improvedproduct, the new global focus on the top line, and views on an omni-channel perspective on inventory; GPS has room to drive the company to new heights. Valuation keeps us sidelined. We are projecting FY13/FY14 EPS estimates of $2.69/$3.00 versus the Street at $2.77/$3.06. Our $42 target price is based on 14x our FY14 estimate versus the peer group average 14x multiple and the company's historical average of 14.5x.”

The Gap shares were mostly flat during pre-market trading Monday. The stock is up 30% YTD.