American Eagle Analyst Upgrades Retailer After It Shows 'Huge Signal Of Strength'

Shares of American Eagle Outfitters Inc AEO are trading at attractive valuation levels, the company has enough liquidity to operate even if all its stores remain closed for the next 12 months, according to Raymond James.

The American Eagle Analyst

Matthew McClintock upgraded American Eagle Outfitters from Market Perform to Outperform, setting a price target of $10.

The American Eagle Thesis

American Eagle Outfitters issuing convertible debt at this time “is a huge signal of strength,” McClintock said in the Wednesday upgrade note. (See his track record here.)

The solid liquidity status positions the company well for gaining substantial market share as the COVID-19 crisis ends, as it can use its cash rich position in an industry that is mostly cash poor, the analyst said. 

The analyst said he expects American Eagle Outfitters to emerge as a market share consolidator after the pandemic is over. 

While the company is among the top three in terms of market share in both U.S. denim and specialty intimates, its growth rates in each of these businesses are more attractive than other leaders, McClintock said. 

American Eagle Outfitters has recently taken initiatives to drive digital traffic and conversion at a time when “digital leadership could separate COVID-19 winners from losers,” the analyst said. 

AEO Price Action

Shares of American Eagle Outfitters were up 2.69% at $7.44 at the time of publication Wednesday.