Bank of America Securities analyst Christopher Nardone reiterated a Hold rating on American Eagle (AEO – Research Report) today and set a price target of $13.00.
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Christopher Nardone has given his Hold rating due to a combination of factors impacting American Eagle’s performance. The company reported first-quarter results that were below expectations and subsequently withdrew its fiscal year guidance, citing macroeconomic uncertainties. The revenue for the quarter was down 5% year-over-year, with comparable sales also declining. A significant factor in the underperformance was the higher promotions and a substantial inventory write-down, particularly affecting the Aerie brand, as the higher-priced assortment did not resonate with consumers.
Looking ahead to the second quarter, management has indicated that inventory levels are now more aligned with sales trends, following the write-down of summer goods. This adjustment is expected to allow for a more normalized margin profile. However, due to the inventory write-down and a lower sales and margin outlook, particularly at Aerie, the earnings per share estimates for fiscal years 2025 and 2026 have been reduced. The price objective is set at $13, reflecting a balance between near-term markdown risks and longer-term growth opportunities, leading to the reiteration of a Neutral rating.
Nardone covers the Consumer Cyclical sector, focusing on stocks such as Carter’s, American Eagle, and Crocs. According to TipRanks, Nardone has an average return of 16.2% and a 60.49% success rate on recommended stocks.
In another report released on May 6, Morgan Stanley also maintained a Hold rating on the stock with a $11.00 price target.