UPDATE: Canaccord Genuity Upgrades The Gap to Hold, Raises PT

In a report published Friday, Canaccord Genuity upgraded its rating on The Gap

from Sell to Hold, and raised its price target from $31.00 to $35.00. Canaccord Genuity noted, “We are upgrading shares of GPS from Sell to HOLD as the company has sustained SSS momentum and improved gross margins ahead of our earlier expectations. GPS has generated SSS growth in seven of the first nine months of FY13, which we think is driven largely by an improvement in fashion. The gross margin turned positive yr./yr. in Q2, which we did not originally think would happen until the back half of FY13. Cotton cost pressures have receded, and we think GPS is poised for substantial yr./yr. margin expansion in Q4. Shares have appreciated 80% YTD compared with the S&P 500 index up 8% and the RLX index +21%. We believe GPS shares are fairly valued trading at 14x our FY13 EPS estimate and 7x FY13E EV/EBITDA.” The Gap closed on Thursday at $33.26.