Key Takeaways
- American Eagle stock is soaring thanks to celebrity endorsements and strong summer numbers.
- Despite recent fluctuations in its performance, the company seems to have made real progress with its loungewear and intimates label, Aerie, UBS said.
- Some analysts are skeptical that the recent bump in business has staying power.
American Eagle is trending. Celebrity endorsements have expanded its reach, and its stock is flying. But can it stay in style?
For the moment, American Eagle Outfitters’ (AEO) shares have completed a remarkable turnaround. They finished Thursday up about 38%, a dramatic jump that pulled them back into positive territory for the year so far; shares that traded below $10 in July are now commanding more than $18. (The stock does, however, remain below the prices around $38 seen in 2021.)
Some of the latest gains may be attributable to the enthusiasm of meme-stock traders, but upbeat results contributed to today’s move. At Aerie, its loungewear and undergarment label, comparable sales rose 3% year-over-year for the quarter ended Aug. 2, while American Eagle’s fell 3%. Companywide, American Eagle reported $1.3 billion in revenue—down 1% from last year, but above analyst expectations.
There’s reason to trust the rally, according to analysts at UBS—in part because of the strength at Aerie, which can’t be attributed to the namesake brand’s campaign with actress Sydney Sweeney. That suggests, UBS wrote, that the company is making progress “not only because of marketing, but also because of much improved products and merchandising,” with room to double its intimate apparel business at the expense of brands like Victoria’s Secret (VSCO).
American Eagle executives said the company is gaining momentum. The Sweeney spot generated sales from an “unprecedented” number of new customers, and a more recent collab with tight end Travis Kelce is also selling well, they said on a conference call Wednesday. The company had a record-breaking Labor Day and is seeing comparable store sales trend upward, it said.
But some are skeptical, and today’s rise has the shares above Visible Alpha’s current consensus price target.
“The jury is still out on whether recent trends can continue following a strong [back to school] season for most of the industry,” Bank of America analysts wrote Thursday. Others vying for teens’ spending, such as Abercrombie and Fitch’s Hollister (ANF) and Pink, a Victoria’s Secret brand, are also seeing sales pick up, JPMorgan said.
“We see potential for inconsistent results,” analysts said in a research note Thursday.
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