BofA/Merrill Lynch upgraded Gildan Activewear (NYSE: GIL) from Neutral to Buy with a price target of $68.00 (from $61.00), citing increased confidence in sales momentum.

Analyst Chris Li notes that while the company has amassed a 6.5% market share in men’s underwear after just one year of national launch further gains would come from new shelf space and program launches. "GIL expects new capacities to be added over the next three years to support sales growth of $1bn between 2014 and 2018 (9% 4-year CAGR)," the analyst comments.

Li also expects the sharp decline in cotton prices could have a positive impact on earnings in FY2016.

Also, despite elevated capex over the next 2-3 years, thye expect GIL to be debt-free by FY2016. Capital returns or accretive acquisitions should follow.

For an analyst ratings summary and ratings history on Gildan Activewear click here. For more ratings news on Gildan Activewear click here.

Shares of Gildan Activewear closed at $58.56 yesterday.