Jefferies cuts American Eagle stock target to $13; holds rating

On Thursday, Jefferies analyst Corey Tarlowe adjusted the price target for American Eagle Outfitters (NYSE:AEO) shares, reducing it to $13 from the previous $17, while retaining a Hold rating on the stock. The revision followed American Eagle’s disclosure of its fourth-quarter earnings, which aligned with the company’s pre-announced estimates. The $2.2 billion market cap retailer, currently trading near its 52-week low of $11.33, has experienced a slower start to the year than anticipated. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with multiple ProTips suggesting potential opportunities for investors.

Management at American Eagle anticipates this sluggish beginning to impact the company’s financials, projecting lower sales year-over-year in both the first quarter and the full fiscal year. The anticipated decline in sales could affect the company’s $5.4 billion revenue base and its healthy 39% gross profit margin. For the upcoming year, the company has guided for a low single-digit percentage decrease in sales and approximately a 14% drop in operating income at the midpoint of their estimates. Despite these challenges, the company maintains a strong dividend track record, having paid dividends consistently for 22 years, with a current yield of 4.37%.

Tarlowe reiterated the Hold rating for American Eagle stock, highlighting the company’s cautious outlook for the year ahead. The adjustment in the price target to $13 reflects the challenges faced by the retailer in terms of sales and operating income. The company’s management is preparing for a year of lower financial results, which could affect its stock performance in the short term.

Investors and market watchers will be keeping a close eye on American Eagle’s ability to navigate the slower start to the year and its efforts to manage costs against the backdrop of lower projected sales. The updated guidance and price target suggest a period of watchful anticipation for the retailer as it addresses these headwinds.

In other recent news, American Eagle Outfitters reported its earnings for the first quarter of 2025, surpassing Wall Street expectations with an earnings per share (EPS) of $0.54, compared to the forecasted $0.51. Revenue met expectations, totaling $1.6 billion. Despite these positive results, the company projects a slight revenue decline for the full year of 2025. Barclays (LON:BARC) analyst Adrienne Yih downgraded American Eagle’s stock rating from Equalweight to Underweight, reducing the price target to $10 from $17, citing a weakening consumer base and declining mall traffic. Meanwhile, Citi analyst Paul Lejuez maintained a Buy rating on the stock but adjusted the price target to $12 from $13, following American Eagle’s solid fourth-quarter performance. The company anticipates challenges in the first quarter of fiscal year 2025 due to macroeconomic volatility and a competitive retail landscape, expecting a mid-single-digit decline in first-quarter sales. American Eagle plans strategic investments in digital platforms and store remodels, aiming to enhance brand amplification and operational optimization.

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