American Eagle Outfitters: Analysts Are on the Sidelines


Aug. 30 2018, Updated 4:25 p.m. ET

Analysts on the sidelines

As of August 29, 2018, of the 18 analysts covering American Eagle Outfitters (AEO) stock, 56.0% have recommended a “hold” rating. Another 39.0% recommended a “buy” rating, and the remaining 5.0% rated it a “sell.”

Despite the company’s strong fiscal Q2 2018 results, two analysts slashed their price target for AEO stock. Jefferies cut the price target to $31.00 from $33.00. J.P. Morgan slashed the price target to $27.00 from $30 earlier. We’ll likely see more changes in the coming days.

Currently, analysts’ 12-month average target price for AEO stock is $25.73, which reflects a 0.9% upside to its stock price on August 29.

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As discussed earlier, American Eagle Outfitters’ fiscal second-quarter revenue of $964.9 million grew 14%, and adjusted EPS of $0.34 rose 79% on a YoY basis. Both the metrics also topped their respective consensus estimates. Apparel retailers’ strategic endeavors including revamping merchandise, a focus on the digital sales channel, and improving operational efficiency have yielded desired results. For American Eagle Outfitters, the intimate apparel brand Aerie is working wonders. Also, strength in the quintessential AE brand is an added positive. Revenue from digital channels continues to rise.

Where do peers stand?

Of the 22 analysts covering Urban Outfitters (URBN), 27.0% gave it a “buy” rating while 68.0% gave it a “hold” rating. Currently, analysts’ target price for URBN stock is $51.00, reflecting a 12.4% upside to the stock price on August 29.

For Abercrombie & Fitch (ANF), 44.0% of the 16 the analysts covering the stock recommended a “hold” rating, while another 25% rated it as a “buy.” The mean target price for ANF stock is $23.08, which indicates a 15.2% downside.

For Gap (GPS), 80.0% of the 25 analysts covering the stock recommended a “hold” rating, while 12.0% rated it as a “buy.” The mean target price is $32.95, which indicates a 7.4% upside.

Valuation overview

On August 28, American Eagle Outfitters was trading at a 12-month forward PE (price-to-earnings) ratio of 16.3x. Following fiscal second-quarter results, the valuation multiple for the stock has decreased 6%.

In comparison, Urban Outfitters, Abercrombie & Fitch, and Gap were trading at 12-month forward PE ratios of 16.4x, 28.5x, and 11.6x, respectively.


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