American Eagle Outfitters an ‘underappreciated’ opportunity - UBS
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American Eagle Outfitters (NYSE:AEO) is a diamond in the retail rough, per UBS analyst Jay Sole.
“Multiple years of survey data suggest American Eagle is a much stronger brand than
investors realize,” Sole advised clients in a note on Monday.
Channel checks performed by the bank revealed American Eagle ranks fourth among non-athletic wear brands in terms of aided and unaided awareness. Additionally, Sole’s team reported that “US consumers' perceptions around American Eagle's prices, quality, and designs have improved” in the past year despite severe underperformance for the stock.
While he recognized that macro pressures are likely to leave the stock at depressed levels for the near term, especially as sales decelerate across apparel, the long term story remains intact. The team added that they consider American Eagle (AEO) a growth stock and expect a strong rebound after the latest bout of market bearishness subsides.
“When the market turns, we think AEO will rebound strongly and surprise investors,” Sole concluded. “This is a main reason we continue to rate the stock Buy.”
He assigned a $23 price target for shares, suggesting an over 90% premium from Friday’s closing price.
Despite the optimistic outlook at UBS, shares of the Pennsylvania-based retailer fell nearly 2% in premarket trading on Monday.
Read more on price sensitivity in the retail space.