Gap ( GPS) may provide its investors with some holiday cheer, following an upgrade from Gerard Klauer Mattison. The institutional brokerage raised its investment rating and earnings estimates for the San Francisco-based apparel retailer, citing improved merchandising and marketing efforts that should generate better-than-expected sales during the holiday shopping season and beyond. The brokerage upgraded the stock to buy from neutral and raised its fourth-quarter earnings estimate to 16 cents a share, from 14 cents. Overall, analysts are expecting the company to earn 12 cents a share, according to Thomson Financial/First Call. The brokerage expects same-store sales to grow at a 5% clip, a significant swing when compared with a 17% decline in the year-ago quarter. For the full year, the brokerage is projecting a net profit of 41 cents a share, ahead of the consensus estimate of 38 cents, and up from a loss of 16 cents last year. "We now believe than an improvement in the quality and styling offered across all divisions is luring core customers back to the stores, and this is sustainable in the near future," wrote analyst John Morris in a research note. Morris said the holiday season for apparel has started off stronger than expected, despite a later Thanksgiving, and that Gap should be one of the best plays in the retail sector, given its broad national exposure and improved merchandise positioning. "The stock has had a nice run, but we see room for further upside, and we are setting a price target at $19," Morris said. Recently, the shares were trading up 36 cents, or 2.3%, at $16.25 on the
New York Stock Exchange .