Gap Inc.’s (GPS) recent stock rally has much further to run as investors have yet to fully appreciate the exciting earnings potential of the clothing giant’s apparel chain Old Navy, according to analysts at Jefferies. 

In a research note, reported on by the Financial Times, Jefferies named Gap as one of its top “Franchise Picks” and upgraded its price target for the company from $35 to $39. That massive vote of confidence sent shares in Gap up 6 percent to $27.6, continuing an impressive run for the stock which has been rallying ever since company executives announced a new strategic shift last week.

Gap plans to boost investment in the fastest growing parts of its business, including Old Navy, its athletic apparel line Athleta and its e-commerce platforms, while shutting down underperforming Banana Republic and flagship Gap stores. To get investors on board, the company also divulged a breakdown of profit margins across its various divisions for the first time in its history.

Based on those provided numbers, Randal Konik, retail analyst at Jefferies, discovered that Old Navy is generating nearly three-fourths of Gap’s profits. That observation prompted him to predict that new investment in the cost-conscious, family-friendly apparel chain could see Old Navy generate 80 percent of company earnings over the next few years.

Konik and his colleagues said that this huge potential is not factored into Gap’s share price, adding that Wall Street continues to value the stock based on the performance of the lower growth Gap line.

This data point is seminal when considering the entire org(anization) is valued like (the) Gap division drives the bus”, when that division only accounts for roughly 7 per cent of profits currently,” Jefferies analysts wrote. (See also: Gap Shares Rise as Old Navy Again Boosts Results, Forecast.)

If Gap’s strategic shift pays off, the company believes that Old Navy can become a $10 billion chain. Jefferies is confident that Old Navy can reach this potential, particularly as its larger stores are less tied to shopping malls, where foot traffic is falling. (See also: Foot Traffic.)

Gap’s CEO Art Peck is also confident that increased investment in Athleta can benefit the company’s top-line. By opening new stores, described by the company as “value expression” shops, he reckons Athleta can top $1 billion in net sales over the next few years.

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