Cramer Predicts Private Equity Buys Gap Inc (GPS) For $25.00

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On tonight’s MAD MONEY on CNBC, Cramer says that Gap Inc. (GPS-NYSE) keeps saying "I’m going higher!"  He says it’s a triple buy even though it is the worst of the worse.  He says he hated it more than anyone, but it’s a buy after Pressler left yesterday.

Their last miserable quarter and the CEO leaving and after all the miserable train wrecks happened it hasn’t fallen down.  He says this is telling you the worst is substantially behind and it’s ready to go up.  Dana Cohen, Cramer’s favorite retail analyst, said it could go to $25.00 on an earnings turnaround alone.  Liz Claiborne’s CEO also said that the company could be turned around.  He says this is the ideal size for private equity money to put the cash to work at $15 Billion, and their money will be recalled if it doesn’t get put to work (somewhat arguable point).  The leases according to Cramer are below market value so they can buy out of the leases cheaper on store closures (that actually is probably very true).  He pointed that even JCPenney was turned around.  Cramer said it could even see $30.00 ultimately.  But the multiple private equity firms that want to do the deal could be won by Thomas H. Lee, who turned JCPenney.  GPS closed up 0.6% at $19.39 today, but it went up 3% more to $19.96 after Cramer touted it,

Cramer predicted that Thomas H. Lee pays $25.00 for Gap Inc within 6-months.  We’ll see if this happens.  I ran break-up values by my own models and had a hard time getting much past $20.00 to $22.00.  Beauty is in the eye of the beholder and the deal could fetch an extra "we gotta put the cash to work" trade, so we’ll see.

I had Pressler as one of the top CEO’s that need to go.  Here is what I said on Monday when Pressler WAS FIRED left the company.

Jon C. Ogg
January 24, 2007