American Eagle Outfitters, Inc. (AEO) Shares Have Potential 38.1% Upside

American Eagle Outfitters, Inc. (NYSE:AEO) is rated as Peer Perform by analysts at Wolfe Research. The firm was pushed by the stock performance to change their PT view from $27 to $22 on December 12. Analysts at Telsey Advisory Group, maintained the company shares at Outperform on December 12 but switched target price from $32 to $24. The stock won favor of Deutsche Bank analysts who expressed their confidence in it using an upgrade from Hold to Buy on November 26. BofA/Merrill analysts came out with bearish views on November 01 when the call was made. They think the stock is now Underperform compared to to their prior call for Neutral.

AEO stock dropped -0.71% in recent trade and currently has a stock-market value of $3.9B. The shares finished at $21, after trading as low as $20.7 earlier in the session. It hit an intraday high Thursday at $21.15. Trading activity significantly improved as the volume at ready counter increased to 5,358,924 shares versus 4,507,120 in average daily trading volume over the past 20 days. So far this year, the volume has averaged about 3,964,902 shares. The stock is now 23.53% above against its bear-market low of $17 on December 24, 2018. It has retreated -42.29% since it’s 52-week high of $29.88 reached in August. Now the market price is up 7.86% on the year and up 8.64% YTD.

Wall Street’s most bullish American Eagle Outfitters, Inc. (NYSE:AEO) analysts are predicting the share price to blow past $29 per share during the next 12 months. The current median share price forecast by them is $25, suggesting that the stock could increase 19.05% in that time frame. The average price target of $24.29 calls for a nearly 15.67% increase in the stock price.

American Eagle Outfitters, Inc. (AEO)’s 50 day simple moving average (SMA 50) price is $20.44 and its 200-day simple moving average (SMA 200) price is $22.49. The company’s stock currently has a total float of 166.44M shares. Its weekly volatility is hovering around 3.92% and felt 3.16% volatility in price over a month. On the upside, the share price will test short term resistance at around $21.2. On a downside, the stock is likely to find some support, which begins at $20.75. The failure to get near-term support could push it to $20.5.

When looking at valuations, American Eagle Outfitters, Inc. (AEO) has a cheap P/E of 14.25x as compared to industry average of 32.9x. Moreover, it trades for 11.9 times the next 12 months of expected earnings. Also, it is trading at rather expensive levels at just over 2.87x price/book and 0.97x price/sales. Compared to others, American Eagle Outfitters, Inc. is in a different league with regards to profitability, having net margins of 6.4%. To put some perspective around this, the industry’s average net margin is 5.91%. AEO’s ROE is 20.6%, which is also considerably better than the industry’s ROE of 15.32%. It’s also very liquid in the near term, with a current ratio of 1.9. The stock has a debt/capital of 0.

Shares of AEO have dropped -0.8% since the company’s most recent earnings report. Over the past 12 fiscal quarters, American Eagle Outfitters, Inc. (NYSE:AEO) has topped consensus earnings estimates in 8 quarters (66%), missed earnings in 2 quarters (16%), whereas at 2 occasion EPS met analyst expectations. AEO last reported earnings that exceeded expectations. The company raked in $0.43 per share, -83.14% change on the same period last year. That was better than consensus for $0.42. Revenue for the recent quarter stood at $1.24 billion, up 1% on last year and below the $1.26 billion predicted by analysts. For this quarter, Wall Street analysts forecast revenue in a range of $848 million to $872 million, which should be compared with $833.5 million generated last year.