What happened

Shares of American Eagle Outfitters (AEO -0.38%) were moving higher today after the company got an endorsement from J.P. Morgan.

The stock closed the day up 3.4% after trading as high as 6.1% earlier in the session.

Shoppers at an outdoor mall.

Image source: Getty Images.

So what

J.P. Morgan analyst Matthew Boss reaffirmed his overweight rating on the retail stock this morning and his price target of $42 after hearing comments from management at a recent conference.

American Eagle management said it was on track for 25% compound annual revenue growth from Aerie, its intimates brand. Boss noted strong customer acquisition, an expanding retail presence for Aerie -- which has been one of the brightest stories in brick-and-apparel retail in recent years -- and double-digit growth in categories like swim, casual clothing, and loungewear.

Now what

The retailer has been a strong performer in recent years with even its core American Eagle Outfitters chain holding up well in a difficult environment. In its second-quarter earnings report, the company had already recovered to operate above pre-pandemic levels with an operating margin of 14.1% in the quarter, its highest mark since 2008. Management also raised its guidance for the year to $600 million in operating income and lifted its quarterly dividend payout by 31% to $0.18, rewarding investors.

On Wednesday, the company also announced the launch of a new premium denim, AE77, which has a lower environmental impact, showing its ability to innovate.

With the stock trading at a price-to-earnings ratio of less than 13, it still looks like a smart buy.