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Gap Stock: If Analyst Is Right, It’s Going Back Near Record High

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The Gap (GPS) will see its shares continue to rise, climbing another 40% from the close Friday, if the most optimistic Wall Street analyst covering the stock is correct.

Gap Store: Credit Getty Images

Jefferies, already with the highest price target on the San Francisco-based clothes store, has boosted its price target on Gap to $51 a share from $50. According to FactSet data, that marks the ninth time going back to the beginning of last year that Randal Konik has increased the goal.

At $51, the target is almost 31% ahead of the consensus price estimate of $39.02. After Jefferies, the second-highest target is $48 at Credit Agricole.

Bears on Gap have been very disappointed since the start of 2012, during which time the stock has surged 96.2% from $18.55. That share performance was one factor, but only one, in Gap being named Yahoo! Finance's company of the year.

The retailer's stock has advanced 16% thus far in 2013. Should Jefferies' view prove to be accurate, the future of Gap remains extremely bright for owners of the shares. Though for some, the call might understandably lead to hand-wringing. From a historical perspective, the $51 target means that Gap would be within striking distance of the best levels it has ever seen. Gap has had only 17 closes at or above $50, according to FactSet records, which go back to 1984. Of those, just six have been higher than $51, and the all-time ending peak of $52.88 came on Feb. 3, 2000. The top intraday price occurred during the following session, when it reached $53.75.

Gap Stock Chart

Generally speaking, shoppers felt a lot better in those days -- back before the dot-com bust, 9/11, the housing collapse and the Great Recession -- but Gap's most recent annual sales did get above $15 billion for the first time in five years, and in the current year, revenue is projected to approach $16.2 billion.

Against its competitors, Gap's earnings multiple doesn't suggest investors are looking for the company to pull off miracle growth, meaning it would seem that any potential sector outperformance isn't yet being priced into the shares. With a forward multiple of 13.7, it's in line with Abercrombie & Fitch (ANF), just ahead of American Eagle's (AEO) 13.3 and below the plus-20s of Aeropostale (ARO) and Urban Outfitters (URBN).

However, should it reach $51, and profits per share equal the $2.62 average forecast for the fiscal year ending next January, the implied multiple on those earnings would be 19.5. That would come down to 17.5 on the fiscal 2015 estimate of $2.91. But either way, using this measure would put Gap on the pricier side of where it's accustomed to being. The stock has an average forward price-to-earnings ratio of 12.3 in the past five years, with a high of 17, FactSet data show.

In recent trading, Gap was up 19 cents, or 0.5%, at $36.58. The range for the past 52 weeks is $25.02 to $37.85.