Since I don't see anybody else waiting around to pat me on the back, I guess I'll just take care of it myself. OK, so maybe correctly predicting that Aeropostale
Do I think Aeropostale is going to be the next Wet Seal
Last week, Aeropostale reported sales figures for May that seem to indicate its inflated stock price is completely justified. Sales soared 19.3% to $88.1 million and comps increased by 1.9%. Frankly, I don't care about the sales growth. The number that matters to me is the comps growth, which compares sales at stores that were open in both time periods, and 1.9% growth doesn't get me shopping for Aeropostale stock. That's especially true when, in May of 2006, comps were down 1.1%, giving the company an easy comparison. Add to that the fact that the company reported comps that were lower by 14% last month, factor in the recent run-up in its stock price, and I think you'll start to see why investors finally caught on and sold the stock after the news.
I don't mean to sound so negative about Aeropostale. In fact, I think the stock will end up doing quite well over the long term. I just wouldn't touch it at its recent prices. We all know it's had strong earnings and sales growth lately, but that's just it; all that wonderful news is already fully accounted for in its stock price. Unless it easily tops estimates in its next earnings release, I don't see what would prompt investors to continue to pump up the stock price. And, thus far, they're not. Since closing the session at a high of just less than $47.50 on May 21, the stock has slipped almost 7.5%. While that still doesn't make it a bargain (it could be had for $40 at the beginning of May), it is a sign that investors are at least acting rationally.
I would watch this stock closely and hope investors overreact and push its share price too low. While I don't expect that to happen soon, it may drop a bit further, making it a more sensible purchase. Now, if only I could predict the bottom for Aeropostale, perhaps I would actually earn that pat on the back.
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