American Eagle: Buying The Colossal Dip

Jordan Sauer profile picture
Jordan Sauer
3.57K Followers

Summary

  • Down 70% from its highs, American Eagle is trading at valuations not seen since the Global Financial Crisis of 2008 and the pandemic lockdowns of 2020.
  • Aerie's comfortable and inclusive products continue to resonate with customers, crushing Victoria's Secret along the way.
  • Shipping costs remain elevated for American Eagle, but manufacturing costs could be in steep decline.
  • We'll take a look at Warren Buffett's brand framework.
  • In the decade ahead, we project returns of 14% per annum.
Aerie REALTreat in Collaboration with Create & Cultivate

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The Thesis

American Eagle has terrific brand power, online marketplaces, and products. The key now is for management to better allocate the company's capital, manage inventory, restore cash flow, and improve the balance sheet. With prudent financial management, AEO will come out of this turbulent environment stronger. We're watching

This article was written by

Jordan Sauer profile picture
3.57K Followers
A natural contrarian, business student, and value investor, I seek opportunities in the market that present outsized returns. I am constantly analyzing financial statements, stress-testing my opinions, and studying the principles of great investors.

Disclosure: I/we have a beneficial long position in the shares of AEO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article includes base-case scenario estimates, using known facts and economic projections. The future is uncertain, and investors must draw their own conclusions.

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