Investors may be reacting to the strong earnings report of Urban Outfitters (NASDAQ:URBN), which reported a surprising profit after the market closed yesterday. American Eagle is scheduled to report its own financial results in two weeks, and the market may be thinking it could notch a performance similarly above expectations.
Earlier this month, an analyst at J.P. Morgan upgraded his outlook for the retailer, saying the market was ignoring the value of American Eagle's Aerie brand, which a different analyst believes could become a $3 billion brand in a few years.
The retailer's depressed stock offered investors a lot of upside, and J.P. Morgan believes American Eagle could hit $17 per share, which is still 45% north of where it's trading even after its rally this morning.
A rising tide tends to lift all boats, so the retailer could just be benefiting from the upbeat mood surrounding apparel. Even Chico's FAS, which missed analysts' expectations for sales and losses, is seeing its stock soar today.
Yet, easy come, easy go, and if American Eagle's own earnings don't measure up, its gains could evaporate in an instant.