Goldman Sachs Says Buy American Eagle (AEO)

Goldman Sachs has a Buy rating on shares of American Eagle AEO, and it has a $19 price target on shares. In a note to investors, Goldman writes, "After 3.5 yrs of relative margin erosion, AEO's is one of only 2 retailers we cover where EBIT margin is below its 5 yr avg (to the tune of 390bps). Off of this low base, we see multiple catalysts with the potential to drive a dramatic improvement in relative performance over the next 12 months." Goldman goes on to say, "Recent strength at ANF is an encouraging sign for AEO as the two have generally performed together with only short-term exceptions – While many perceive ANF and AEO to be a zero-sum game, these two businesses have historically performed well together and poorly together, as we illustrate below with a history of same-store gross profit growth for the two businesses. While AEO has lagged behind ANF's recent improvement, we see their combined trajectory as encouraging as it is outpacing peers for the first time since the product cycle first turned against them in 2006. History suggests that while one may lag in the near-term, that lag tends to be relatively limited in duration." Shares of AEO lost 2 cents yesterday to close at $14.55, a loss of 0.14%.