Citigroup Turns Bullish On American Eagle

Citigroup analyst Paul Lejuez upgraded American Eagle Outfitters’ (AEO) rating to Buy from Hold, as he believes that “the success and opportunity at Aerie is too significant to overlook.” Lejuez also lifted the stock’s price target to $14 (34.7% upside potential) from $12.

Lejuez is bullish on the company’s popular Aerie brand apparel, which includes intimates and athleisure. The analyst believes that it will continue “to be a share winner in the intimates/loungewear category”. He added that “Aerie is showing signs of becoming more of a lifestyle brand with its entry into athletic/athleisure.”

Lejuez expects Aerie’s market share to accelerate with the closing of around 250 of L Brands’ (LB) Victoria’s Secret stores. On July 30, the analyst cut L Brands’ stock to Sell from Hold.

On June 3, American Eagle posted larger-than-expected 2Q loss due to a steep decline in sales and store traffic amid the coronavirus pandemic. American Eagle saw a decline in demand for its jeans and Aerie brand, which revenue dropping 2% in the second quarter.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 7 Buys and 5 Holds. The $13.71 average price target implies 32% upside potential in the shares. (See AEO stock analysis on TipRanks).

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