UPDATE: Nomura Initiates Coverage on The Gap on Valuation

In a report published Monday, Nomura analyst Simeon Siegel initiated coverage on

with a Neutral rating and $42.00 price target. In the report, Nomura noted, “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 improved product, 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 closed on Friday at $40.39.