AEO Stock Intrinsic Value – Jefferies Downgrades American Eagle Outfitter’s Rating to Hold, Stock Sinks in Early Trading.

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AEO Stock Intrinsic Value – Jefferies has downgraded American Eagle Outfitters ($NYSE:AEO)’ rating to Hold from Buy and as a result, the mall stock saw a decline in early trading on Wednesday. Jefferies cited potential risks to the company’s performance due to an impending recession in the United States for the downgrade in rating. This assessment of the company’s future greatly affected the stock price and it dropped significantly in the early hours of trading. Analysts believe that AEO may not be able to sustain itself during an economic recession, especially as they are heavily reliant on customers visiting physical mall stores and boutiques.

This means that their sales are vulnerable to lockdowns, store closures, and drops in consumer spending, something the firm believes may be highly likely during an economic recession. Due to this downgrade, investors have been concerned with the stock’s outlook and have been seeking more information about their short-term performance. In response to the downgrade, AEO has said that they have strategies in place to mitigate the risk of a recession, including cost-cutting, diversifying their product offerings, and focusing on digital sales. Whether these strategies will be effective, however, is yet to be seen.

Stock Price

This news came amid a larger wave of negative sentiment surrounding the company, causing their stock to open at $15.3 and close at $15.6, representing a 2.9% drop from the prior closing price of $16.0. Although American Eagle Outfitters have made efforts to diversify away from their traditional mall anchor stores, with additions such as the digital platform “Aerie,” the stock remains down as investors await further developments regarding the fate of the firm. Live Quote…

About the Company

Income Snapshot

Below shows the total revenue, net income and net margin for AEO. More…

Cash Flow Snapshot

Below shows the cash from operations, investing and financing for AEO. More…

Balance Sheet Snapshot

Below shows the total assets, liabilities and book value per share for AEO. More…

Key Ratios Snapshot

Some of the financial key ratios for AEO are shown below. More…

Analysis – AEO Stock Intrinsic Value

At GoodWhale, we strive to provide detailed analysis of the fundamentals of publicly traded companies, in order to provide the most accurate information and analysis to our clients. We analyze the fundamentals of AMERICAN EAGLE OUTFITTERS using our proprietary Valuation Line, which takes into account financial data such as sales growth, market trends, and industry performance. The results of our research suggest that the fair value of AMERICAN EAGLE OUTFITTERS shares is around $10.6. However, the current market price for the stock is $15.6, suggesting that it is currently overvalued by 47.7%. This discrepancy could present a potential opportunity for investors – either to invest at a discount or to sell their current holdings and take a profit. More…

Peers

American Eagle Outfitters Inc competes with Roots Corp, Aritzia Inc, and Zumiez Inc. for market share in the clothing retail industry. All four companies offer a variety of clothing and accessories for men, women, and children, but American Eagle Outfitters Inc has a few key differentiators. First, American Eagle Outfitters Inc operates more than 1,000 stores in the United States, compared to Roots Corp’s 85 stores, Aritzia Inc’s 97 stores, and Zumiez Inc’s 741 stores. Second, American Eagle Outfitters Inc’s product mix includes a larger proportion of private label merchandise than its competitors, which allows the company to control cost and maintain higher profit margins.

– Roots Corp ($TSX:ROOT)

Roots Corp is a Canadian retailer that specializes in selling outdoor lifestyle clothing and accessories. The company was founded in 1973 and today operates more than 120 stores across Canada. In addition to its retail stores, Roots also operates an online store and sells its products through wholesale channels.

Roots Corp has a market cap of 115.97M as of 2022. The company’s ROE for the same year is 12.62%.

– Aritzia Inc ($TSX:ATZ)

Aritzia Inc. is a Canadian women’s fashion retailer founded in 1984. The company operates over 80 stores across Canada and the United States under eight different banners. Aritzia offers a wide range of women’s clothing, accessories, and beauty products. The company has a market cap of 5.72B as of 2022 and a return on equity of 31.82%.

– Zumiez Inc ($NASDAQ:ZUMZ)

Zumiez Inc is a publicly traded company with a market capitalization of 407.32M as of 2022. The company has a strong return on equity of 16.06% and is involved in the retail industry. Zumiez Inc operates stores that sell apparel, footwear, and accessories for young men and women. The company’s focus is on action sports, such as skateboarding, snowboarding, and motocross.

Summary

Investment analysts at Jefferies recently downgraded American Eagle Outfitters’ stock rating to “hold”, leading to a significant drop in the stock’s price in early trading. This decision is based on a pessimistic outlook surrounding the company’s current and future earnings prospects. The company’s sales in physical stores have been affected by the global pandemic, while online sales continue to remain strong. Overall, the consensus among investors is that American Eagle Outfitter’s stock is no longer a favorable investment option.