Gap stock: Buy or sell?

FORTUNE -- The Gap has suffered for some time as retail rivals J. Crew and Abercrombie & Fitch continue to steal market share. Sales have fallen every year for the last five years, and though Gap (GPS, Fortune 500) has made headway into foreign markets like Japan, the bulk of its fortunes are tied to a shrinking U.S. market.

Even so, some investors are bullish: The retailer's higher-end Banana Republic brand continues growing while its Old Navy chain appeals to cost-conscious shoppers. Meanwhile, recent additions to Gap's fashion lineup -- including a strong fall black pants launch -- attract customers. With the stock down 12% in the past year, we asked two analysts for their take.

Bull: Dorothy Lakner, Caris & Co.

"Gap worked hard to right its ship over the past decade and is now in a strong

financial position, with no debt and $1.7 billion in cash -- which it is returning to shareholders. The key is growing the top line. But Gap has shown it can do so, beginning in 2009 and into the first half of 2010. Despite the skeptics, Gap's launch last year of premium denim was a big success, one it seems to be repeating with black pants this year.

"Banana Republic is doing well too. They're focusing on international growth. They're essentially online in 55 countries, and that will be 65 by the end of the year. They're pretty advanced, and there are themes that they don't get a lot of credit for.

"Wall Street has continually underestimated the company's disciplined approach to the business. The stock, $19, is trading at around 8.7 times my earnings estimate for 2011. The specialty-retail group's price/earnings ratio is 10. Over the past two years Gap's average forward multiple has been 12. We think the stock can reach $30 over the next year."

Bear" Brian Sozzi, Wall Street strategies

"I upgraded the stock to hold in August, so I'm not as bearish as I used to be. However, my price target is still $17. The Gap brand is not generating the comparable-store sales growth you would expect following years of sharp declines and the attention CEO Glenn Murphy has given the division since holiday 2009. The Gap division's same-store sales fell 4% in the second quarter (the company's overall comparable sales rose 1%). That's after two years of mostly double-digit declines. So how good is that?

"Old Navy is another worry. It generates 40% of Gap's sales, and it's competing directly with Aéropostale, H&M, Forever 21, and Target (TGT, Fortune 500), which have become quite price-competitive. Gap has had to reduce its prices, hurting revenue. The problem for Gap is years of disappointing consumers, inconsistent execution on product, and competitors that are offering a stronger value equation.

"One of the themes that's going untold this back-to-school is department stores have fought back. They've done some good things on private label, especially Macy's (M, Fortune 500), and they've taken the fight back to specialty apparel because specialty apparel has continued to stick to the same formula. These factors, along with higher costs down the pike, increase the risk that it'll fail to meet earnings estimates for 2011."