American Eagle Stock: Hold Rating Amidst Uncertain Outlook and Margin Pressures

Morgan Stanley analyst Alexandra Straton maintained a Hold rating on American Eagle (AEO – Research Report) on May 30 and set a price target of $10.00.

Alexandra Straton’s rating is based on a combination of factors that suggest American Eagle’s stock may remain stable without significant upward movement in the near term. The company’s first-quarter results were in line with prior announcements, showing a decline in sales and a substantial loss in earnings before interest and taxes (EBIT), which fell short of initial expectations. This was largely due to product mis-execution and necessary inventory write-downs, resulting in a significant impact on gross margins.
Looking forward, the company’s guidance for the second quarter also falls short of market consensus, with expectations of continued pressure on gross margins due to higher markdowns and fixed cost de-leverage. Furthermore, the withdrawal of guidance for 2025 reflects ongoing uncertainty around inventory management and strategic planning. As investors await more clarity on management’s future strategy, the stock is expected to remain range-bound, leading to the Hold rating.

In another report released on May 30, TD Cowen also maintained a Hold rating on the stock with a $11.00 price target.