American Eagle Takes to the Skies

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We've all heard the expression "got its wings clipped," and everyone knows that those of us who write about American Eagle Outfitters (NYSE: AEO) have had ample opportunity to wear out this old saw in recent months. In fact, with the shares down nearly 45% over the past 12 months, I suspect I could have gotten away with saying the teen clothier had one of its wings ripped clean off -- until today.

In what appears to be a relief rally sparked by a favorable weekend write-up in Barron's, shares are soaring once again. Markets around the world may be bleeding red today, but the Eagle is flying up more than 8% in the first half of today's trading.

Could a simple magazine mention really be the reason for AE's shares soaring? The evidence strongly supports this theory. As it turns out, three other retail clothiers mentioned in the article as potential private equity targets -- Ann Taylor (NYSE: ANN), Charlotte Russe (Nasdaq: CHIC), and Hot Topic (Nasdaq: HOTT) -- are also among today's market gainers. And looking farther afield, we see that pretty much anyone whose business can be shoehorned into the "specialty-retailer" rubric praised by Barron's is up today -- Gap (NYSE: GPS), Abercrombie (NYSE: ANF), and Aeropostale (NYSE: ARO) to name just a few. In a word, "yes," I think Barron's is behind today's surge.

Not that I expect investors to complain about the flimsy basis for their good fortune. Nor the folks at Motley Fool Stock Advisor, where we have recommended AE for investment (along with Gap, by the way). And I'll complain least of all. To the contrary, whatever the source of AE's rise, I wholeheartedly agree with the move. AE has been too cheap, for too long, to fail to rise at the slightest hint of a catalyst. Even after this morning's surge, the stock sells for a mere 11.6 times trailing earnings -- cheap when compared to the 14% annual profits growth that analysts expect it to produce over the next five years.

Long story short, this rebound was long overdue.