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On Wednesday, Jefferies analyst Corey Tarlowe adjusted the price target on American Eagle Outfitters (NYSE:AEO) stock, reducing it to $11 from the previous target of $13, while keeping a Hold rating on the shares. The revision follows American Eagle’s decision to retract its full-year financial forecast, signaling limited visibility into the company’s future performance. According to InvestingPro data, the company currently trades at a P/E ratio of 7.42, suggesting potential undervaluation relative to peers.
The analyst cited several factors contributing to the cautious stance on the retailer’s stock. One of the primary concerns highlighted was a 4% decline in comparable sales at Aerie, American Eagle’s lingerie and activewear segment, during the first quarter. Despite these challenges, the company maintains strong fundamentals with annual revenue of $5.33 billion and a healthy gross margin of 39.2%. Challenges with product assortment and execution were also noted as areas of concern for the company.
Additionally, the analyst pointed out that American Eagle is facing increased promotional activity and restructuring charges, which could impact the company’s financials. These internal issues, combined with the broader economic uncertainty, have led to an underwhelming trend for the retailer’s stock. However, InvestingPro analysis reveals the stock has shown resilience with a significant 13.88% return over the past week.
The maintenance of the Hold rating by Jefferies indicates that the investment firm advises investors to maintain their current position in American Eagle stock without taking new positions or divesting, given the present circumstances.
American Eagle Outfitters has not provided a new forecast for the fiscal year, leaving investors and analysts to navigate the uncertain landscape without clear guidance from the company. As the retail sector grapples with various challenges, American Eagle’s recent performance and strategic decisions will be closely watched by the market.
In other recent news, American Eagle Outfitters reported preliminary financial results for the first quarter ending May 3, 2025, revealing a decline in revenue to approximately $1.1 billion, a 5% decrease from the previous year. The company also projected a GAAP operating loss of about $85 million and an adjusted operating loss of $68 million, driven by increased promotional activities and a significant inventory charge. Additionally, American Eagle withdrew its fiscal year 2025 guidance, citing market uncertainty. On the analyst front, Jefferies raised American Eagle’s price target to $113 while maintaining a Hold rating, acknowledging the company’s strategic financial moves such as an equity forward agreement worth over $2 billion. In a separate development, Synchrony extended its credit program partnership with American Eagle, continuing to manage the Real Rewards credit card, which is recognized for its customer benefits. Furthermore, board member Stephanie Pugliese resigned to become CEO at another company, leaving a vacancy that American Eagle has yet to fill. Lastly, the company announced a $200 million Accelerated Share Repurchase program, signaling confidence in its financial strategy and long-term growth plan.
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