Gap shares were rising 2.8% to $38.34 after Sterne Agee analyst Ike Boruchow upgraded the stock to "buy" from "underperform."
Boruchow said the stock is a buy now that his short thesis has played out (the stock is down 17% over the past six months vs. the S&P 500, which is up 10%).
"GPS was a holiday outperformer (1 of just 3 retailers that beat plan), compares are easier in '14, and GPS has the flexibility (SG&A, buybacks) to keep growing the bottom line - even in a tough retail environment," Boruchow wrote in a note. "Hence, we're jumping on GPS as our best value name to own in 2014."
He raised earnings estimates by 4 cents to $2.92 a share for 2014 and by 10 cents to $3.28 for 2015. Boruchow also increased his price target by $6 to $44.
Gap reports earnings on Feb. 27, according to Yahoo! Finance.
Shares of TJX tumbled 3% to $59.99 after Boruchow cut his rating to "neutral" from "buy." Boruchow wrote in a separate note that while TJX's business model remains strong, the stock's risk/reward is becoming less favorable.
"With the stock up 40%+ the past 12 months and trading at an all-time high valuation, the risk/reward has become less compelling," he wrote in a research note. "Investors may be somewhat complacent that TJX will continue to beat numbers, but most retailers that missed holiday cited unfavorable weather in areas where TJX has a meaningful footprint (NE, MW, Canada), while negative reads from furnishings peers don't bode well for HomeGoods. We'd take profits and wait for a better entry point."
Boruchow trimmed his estimates for the company's TJ Maxx and Marshall's same-store sales (commonly referred to as Marmaxx) to 2% from 3% and HomeGoods to 4% from 6%, with flat sales vs. 3% in its Canadian division.
He also cut his price target by $2 to $66 and earnings estimates for the fourth quarter by 3 cents to 82 cents a share. TJX reports on Feb. 26, according to Yahoo! Finance.
-- Written by Laurie Kulikowski in New York.