Shares of specialty retailer American Eagle Outfitters, Inc. (AEO) have surged 52.5% over the past 12 months, delivered better-than-estimated third-quarter results. The company’s earnings per share (EPS) jumped more than 100% over the previous year.
Notably, AEO saw a margin expansion during the quarter on the back of higher demand, inventory, supply chain initiatives, and lower promotional activity.
Furthermore, AEO has announced the acquisition of Quiet Logistics to boost its supply chain.
With these developments in mind, let us take a look at the changes in AEO’s key risk factors that investors should know.
According to the TipRanks Risk Factors tool, AEO’s top two risk categories are Ability to Sell and Macro & Political, each contributing 25% to the total 28 risks identified. In its recent quarterly report, the company has added one key risk factor under the Legal & Regulatory risk category.
AEO acknowledged that the present COVID-19 pandemic vaccine mandates and other regulations could adversely impact its business, financial condition, and prospects. (See Insiders’ Hot Stocks on TipRanks)
AEO has more than 35,000 employees worldwide and it would be subject to COVID-19 vaccination or testing mandates with the government regulations. A vaccine mandate could result in disruptions to the company’s retail store operations and distribution operations, result in employee attrition, and higher labor costs.
Compared to a sector average of 17%, AEO’s Ability to Sell risk factor is at 25%.
Wall Street’s Take
On November 23, Jefferies analyst Janie Stichter reiterated a Buy rating on the stock alongside a price target of $42.
The analyst favorably views AEO’s margin expansion, broad-based revenue growth, and supply chain initiatives. Additionally, Stichter believes the addition of Quiet Logistics and AirTerra provides ongoing fulfillment benefits, and the potential for AEO’s supply chain businesses to drive substantial volume/margin as a standalone segment.
Consensus on the Street is a Moderate Buy based on 4 Buys and 4 Holds. The average American Eagle price target of $36.38 implies a potential upside of 29% for the stock.