American Eagle Faces Financial Challenges Amid Inventory Write-Down and Tariff Impacts, Justifying Hold Rating

Analyst Christopher Nardone of Bank of America Securities reiterated a Hold rating on American Eagle (AEO – Research Report), reducing the price target to $11.00.

Christopher Nardone has given his Hold rating due to a combination of factors affecting American Eagle’s financial outlook. The company faced challenges in the first quarter, primarily due to product execution issues, which led to an inventory write-down of $75 million. This has resulted in a cautious outlook for the second quarter, with expected earnings before interest and taxes (EBIT) below market expectations.
Additionally, the company is dealing with tariff impacts that are expected to increase the cost of goods sold by $40 million in the fiscal year, despite mitigation efforts. While management plans to control selling, general, and administrative expenses, the key to improving the stock’s valuation will be enhancing sales trends. The potential for a strong earnings recovery in 2026 provides some optimism, but the current challenges justify the Hold rating.

In another report released today, Barclays also maintained a Hold rating on the stock with a $11.00 price target.