Here's Why Morgan Stanley Downgraded American Eagle Outfitters, Sees Considerable Downside

Morgan Stanley analyst Kimberly Greenberger downgraded American Eagle Outfitters Inc AEO to Underweight from Equal-Weight with a price target of $8, down from $22, implying a 32% downside.
The analyst noted the company reduced its 2022 guidance as its optimism proved excessive. Greenberger sees further risk to sales driven by significant Average Unit Retail (AUR) giveback.
She cited that the company needed to cut its lofty 2023 targets, keeping in mind the demand reversion in the second quarter.
Consumers will be more price-selective, making it even more difficult for retailers to extract price increases as they attempt to offset input cost inflation & elevated freight expense.
Greenberger said she sees a further downside to margins, driven primarily by merchandise margin giveback and topline uncertainty.
Price Action: AEO shares are trading lower by 9.44% at $11.85 in premarket on the last check Tuesday.
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