Stock market today: S&P 500 climbs as health care, tech gain; Nvidia earnings loom
On Wednesday, Morgan Stanley (NYSE:MS) downgraded American Eagle Outfitters (NYSE:AEO) stock, moving from an Overweight to an Equalweight rating and adjusting the price target to $17.00 from the previous $19.00. The firm’s analyst cited an increasingly competitive environment and early signs of recovery in a key competitor as reasons for the change. Currently trading at a P/E ratio of 13.3 and offering a 3.17% dividend yield, InvestingPro analysis suggests the stock is trading below its Fair Value.
In August 2023, the analyst had upgraded American Eagle on the belief that the brand would continue to gain market share due to a shift towards baggier and wider-leg denim styles. American Eagle enjoyed success following this trend throughout the second half of 2023 and into 2024, which resulted in positive comparable sales and improving margins. The company’s revenue grew 6.38% in the last twelve months, with a healthy gross profit margin of 39.15%.
However, as the company moves into 2025, Morgan Stanley now sees a more challenging competitive landscape, particularly in the intimates and apparel sectors. The analyst pointed to VSCO’s positive comparable sales in the third quarter of the fiscal year 2024 as a potential challenge to Aerie, American Eagle’s intimates brand, which could affect the acceleration of Aerie’s comparable sales. Despite competitive pressures, InvestingPro data shows that eight analysts have recently revised their earnings expectations upward for the upcoming period.
According to the analyst, recent stock price movements and a pullback in valuation suggest that the market has already begun to price in some of these concerns. The firm anticipates that American Eagle’s stock will likely trade within a certain range in the near term, reflecting the new market dynamics and competitive pressures. For deeper insights into AEO’s valuation and competitive position, including exclusive ProTips and comprehensive financial analysis, visit InvestingPro.
In other recent news, American Eagle Outfitters has reported promising financial developments. The company has raised its fourth-quarter operating profit guidance to $135 million, up from the previously estimated range of $125-130 million, following positive holiday season performance. This increase is attributed to a 2% rise in comparable sales. BofA Securities and Citi analysts have maintained a Neutral rating on American Eagle’s shares, while Raymond (NSE:RYMD) James initiated coverage with a Market Perform rating, indicating a balanced risk/reward scenario.
In response to these developments, BofA Securities analysts have revised their fourth-quarter earnings per share (EPS) estimate for American Eagle, increasing it by $0.03 to $0.52. However, BofA Securities, Citi, and Raymond James analysts have kept their full-year 2025 EPS forecasts unchanged at $1.81, $1.87, and $1.82 respectively. The company’s lingerie and activewear segment, Aerie, has been highlighted as a strong performer by both company executives and analysts.
These are all recent developments and reflect the company’s current financial performance and projections. The company’s executives and analysts from various firms have provided these updates, ensuring that they are based on verifiable facts and independent analysis.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.