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AEO Stock Drops 7% in a Month: Is This an Opportune Time to Buy?
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American Eagle Outfitters Inc. (AEO - Free Report) stock has seen a downward movement since reporting its second-quarter fiscal 2024 results on Aug. 29. Although the company reported a strong quarter overall, lower-than-expected revenues disappointed investors. As a result, shares of this leading apparel retailer fell 7.2% in the past month, which was better than the industry’s decline of 18.8%.
The AEO stock’s current price of $19.89 reflects a 38.1% premium to its 52-week low of $14.40. This price reflects a 24.8% discount to its 52-week high mark of $26.44.
With the recent stock decline, American Eagle has fallen below the critical technical thresholds, and trades below its 50 and 200-day moving averages. The moving average is an important indicator for gauging market trends and momentum. The breach of this threshold indicates a bearish outlook and heightens investor concerns about the challenges in sustaining the recent performance levels.
AEO’s Stock Trades Below 50 and 200-Day Moving Averages
Image Source: Zacks Investment Research
Is AEO’s Overall Share Performance Just as Bad?
Despite the recent decline, the American Eagle stock portrays a sustained growth in the past year. The AEO stock’s rally of 36.2% in a year leaves behind the industry’s growth of 5.2% and the S&P 500’s 27.5% rally.
American Eagle’s One-Year Stock Performance
Image Source: Zacks Investment Research
Understanding AEO’s Long-Term Growth Prospects
American Eagle's long-term growth prospects are evident from its brand strength and gains from progress on its Powering Profitable Growth strategy. The company is progressing with its Powering Profitable Growth plan, set to build on the impressive gains of fiscal 2023.
The plan aims for annual operating income growth in the mid-to-high teens, targeting more than $570 million by the end of fiscal 2026. This means an operating margin of 10%, with a 300-basis-point increase in the next few years. The company also projects 3-5% annual revenue growth, reaching $5.7-$6 billion by fiscal 2026. It is laser-focused on enhancing its brands, streamlining operations and maintaining financial discipline.
The company also stays on track with its Real Power Real Growth plan zeroed in on boosting profitability through savvy real estate moves, inventory optimization, a customer-first omni-channel approach, and smart supply-chain investments. American Eagle is actively expanding the Aerie brand into new markets, driving innovation and growing its customer base. With nearly 30 locations sporting the fresh "lived-in" store design and remodeled stores showing stellar results, the Aerie brand’s momentum is undeniable.
AEO is seeing revived strength in its flagship American Eagle brand, with revitalizing brand strength and reconnecting with consumers in a big way. A key driver behind this resurgence is American Eagle's focus on enhancing the customer experience, both online and in-store, with its seamless omni-channel strategy and innovative store concepts.
Estimate Revision Favoring the AEO Stock
Reflecting the positive sentiment around AEO, the Zacks Consensus Estimate for AEO’s fiscal 2024 and 2025 EPS has risen 1.7% and 1.6%, respectively, in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
For fiscal 2024, the Zacks Consensus Estimate for AEO’s sales and EPS implies 2.5% and 17.1% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 3.5% and 8.9% year-over-year increases, respectively.
Image Source: Zacks Investment Research
Undervalued Stock: Is it Opportune to Buy?
American Eagle trades at a discount to its broader industry and the market at large on a forward 12-month P/E basis, making the stock an attractive pick for investors. AEO’s forward 12-month P/E ratio stands at 10.58X, below the industry average of 14.97X and the S&P 500’s average of 21.55X.
Image Source: Zacks Investment Research
A discounted valuation tied with the company’s forward outlook and stability in estimates indicates favorable prospects ahead.
How to Play the AEO Stock?
Despite the recent dip, American Eagle shows resilience and growth potential in its earnings outlook and strong fundamentals. AEO is well-positioned for sustained growth, banking on robust strategies, such as Powering Profitable Growth, Real Power Real Growth, Aerie brand expansion and digital endeavors.
AEO’s recent stock decline may appear concerning at first glance, but it could also be seen as an opportunity for savvy investors. The company's current price and discounted valuation present a compelling entry point for investors eager to invest in this profitable apparel retailer. For those who already own the stock, stay invested in this Zacks Rank #3 (Hold) stock for solid long-term prospects.
Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings indicates growth of 11.6% and 10.7%, respectively, from the year-ago reported figures. The company has a trailing four-quarter earnings surprise of 7.1%, on average.
Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank of 1. ANF delivered an earnings surprise of 28% in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current financial-year sales and earnings indicates growth of 13.1% and 63.4%, respectively, from the year-ago reported figures.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 47.2% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 11.5% from the year-ago figure.
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American Eagle Outfitters Inc. (AEO - Free Report) stock has seen a downward movement since reporting its second-quarter fiscal 2024 results on Aug. 29. Although the company reported a strong quarter overall, lower-than-expected revenues disappointed investors. As a result, shares of this leading apparel retailer fell 7.2% in the past month, which was better than the industry’s decline of 18.8%.
The AEO stock’s current price of $19.89 reflects a 38.1% premium to its 52-week low of $14.40. This price reflects a 24.8% discount to its 52-week high mark of $26.44.
With the recent stock decline, American Eagle has fallen below the critical technical thresholds, and trades below its 50 and 200-day moving averages. The moving average is an important indicator for gauging market trends and momentum. The breach of this threshold indicates a bearish outlook and heightens investor concerns about the challenges in sustaining the recent performance levels.
AEO’s Stock Trades Below 50 and 200-Day Moving Averages
Image Source: Zacks Investment Research
Is AEO’s Overall Share Performance Just as Bad?
Despite the recent decline, the American Eagle stock portrays a sustained growth in the past year. The AEO stock’s rally of 36.2% in a year leaves behind the industry’s growth of 5.2% and the S&P 500’s 27.5% rally.
American Eagle’s One-Year Stock Performance
Image Source: Zacks Investment Research
Understanding AEO’s Long-Term Growth Prospects
American Eagle's long-term growth prospects are evident from its brand strength and gains from progress on its Powering Profitable Growth strategy. The company is progressing with its Powering Profitable Growth plan, set to build on the impressive gains of fiscal 2023.
The plan aims for annual operating income growth in the mid-to-high teens, targeting more than $570 million by the end of fiscal 2026. This means an operating margin of 10%, with a 300-basis-point increase in the next few years. The company also projects 3-5% annual revenue growth, reaching $5.7-$6 billion by fiscal 2026. It is laser-focused on enhancing its brands, streamlining operations and maintaining financial discipline.
The company also stays on track with its Real Power Real Growth plan zeroed in on boosting profitability through savvy real estate moves, inventory optimization, a customer-first omni-channel approach, and smart supply-chain investments. American Eagle is actively expanding the Aerie brand into new markets, driving innovation and growing its customer base. With nearly 30 locations sporting the fresh "lived-in" store design and remodeled stores showing stellar results, the Aerie brand’s momentum is undeniable.
AEO is seeing revived strength in its flagship American Eagle brand, with revitalizing brand strength and reconnecting with consumers in a big way. A key driver behind this resurgence is American Eagle's focus on enhancing the customer experience, both online and in-store, with its seamless omni-channel strategy and innovative store concepts.
Estimate Revision Favoring the AEO Stock
Reflecting the positive sentiment around AEO, the Zacks Consensus Estimate for AEO’s fiscal 2024 and 2025 EPS has risen 1.7% and 1.6%, respectively, in the past 60 days. The upward revision in earnings estimates indicates analysts’ increasing confidence in the stock.
For fiscal 2024, the Zacks Consensus Estimate for AEO’s sales and EPS implies 2.5% and 17.1% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 3.5% and 8.9% year-over-year increases, respectively.
Image Source: Zacks Investment Research
Undervalued Stock: Is it Opportune to Buy?
American Eagle trades at a discount to its broader industry and the market at large on a forward 12-month P/E basis, making the stock an attractive pick for investors. AEO’s forward 12-month P/E ratio stands at 10.58X, below the industry average of 14.97X and the S&P 500’s average of 21.55X.
Image Source: Zacks Investment Research
A discounted valuation tied with the company’s forward outlook and stability in estimates indicates favorable prospects ahead.
How to Play the AEO Stock?
Despite the recent dip, American Eagle shows resilience and growth potential in its earnings outlook and strong fundamentals. AEO is well-positioned for sustained growth, banking on robust strategies, such as Powering Profitable Growth, Real Power Real Growth, Aerie brand expansion and digital endeavors.
AEO’s recent stock decline may appear concerning at first glance, but it could also be seen as an opportunity for savvy investors. The company's current price and discounted valuation present a compelling entry point for investors eager to invest in this profitable apparel retailer. For those who already own the stock, stay invested in this Zacks Rank #3 (Hold) stock for solid long-term prospects.
Key Picks
We have highlighted three better-ranked stocks, namely Boot Barn (BOOT - Free Report) , Abercombie (ANF - Free Report) and Deckers Outdoor (DECK - Free Report) .
Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings indicates growth of 11.6% and 10.7%, respectively, from the year-ago reported figures. The company has a trailing four-quarter earnings surprise of 7.1%, on average.
Abercrombie, a leading casual apparel retailer, currently sports a Zacks Rank of 1. ANF delivered an earnings surprise of 28% in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s current financial-year sales and earnings indicates growth of 13.1% and 63.4%, respectively, from the year-ago reported figures.
Deckers, a footwear and accessories dealer, currently carries a Zacks Rank #2 (Buy). DECK delivered an average earnings surprise of 47.2% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales indicates growth of 11.5% from the year-ago figure.