Analyst Alexandra Straton from Morgan Stanley maintained a Hold rating on American Eagle (AEO – Research Report) and decreased the price target to $12.00 from $16.00.
Alexandra Straton’s rating is based on several considerations that influence the current and future outlook of American Eagle’s stock. Despite the stock trading at a significant discount compared to its pre-COVID average and its mall-based specialty peers, Straton remains cautious due to a challenging consumer environment and a volatile macroeconomic backdrop. These factors contribute to a competitive apparel retail landscape, making it difficult to have confidence in the company’s ambitious sales and profitability targets outlined in their fiscal year guidance.
Moreover, while American Eagle posted a modest earnings beat in the fourth quarter, the company’s guidance for the upcoming fiscal year falls short of expectations. This, coupled with the need to potentially reset medium-term financial targets, limits the potential for investors to gain confidence in the company’s ability to achieve its goals. Given these circumstances, Straton believes that the current low valuation of the stock appropriately reflects these challenges, with limited catalysts for change in the near term. As a result, she maintains a Hold rating with a $12 price target.
In another report released today, TD Cowen also maintained a Hold rating on the stock with a $11.00 price target.
Based on the recent corporate insider activity of 42 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of AEO in relation to earlier this year.