Please ensure Javascript is enabled for purposes of website accessibility

Why American Eagle Outfitters Is Trading Higher Today

By Rich Duprey – Aug 12, 2020 at 12:10PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Analyst expectations for the apparel retailer are rising based on a number of factors.

What happened

Shares of American Eagle Outfitters (AEO -1.69%) are trading 4% higher Wednesday morning, after an analyst at J.P. Morgan upgraded his outlook on the stock to "overweight" with a $17 price target, some 47% above where it closed yesterday. 

So what says analyst Matthew Boss indicates that the 45% decline in the apparel retailer's stock over the last 18 months means the market has "mis-priced" its shares and is ignoring strong growth drivers for the company.

Six teens in American Eagle Outfitters clothing sit on a cluster of large rocks.

Image source: American Eagle Outfitters.

Among those growth drivers is American Eagle's lingerie brand, Aerie, which another analyst has separately said could become a $3 billion business in the next five years, stealing market share away from L Brands' Victoria's Secret label.

Now what

Boss says the back-to-school season's disruption because of the coronavirus pandemic is more than offset by Aerie's potential. In addition, he says that American Eagle's commitment to closing stores is a tailwind for the retailer. 

He believes the $11.50 price range American Eagle was trading at implies a "zero value" to the brand, even though the company generates over $3 billion in revenue annually and is the top denim retailer in the key 15- to 25-year-old demographic.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

American Eagle Outfitters Stock Quote
American Eagle Outfitters
$15.98 (-1.69%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.