On Tuesday, UBS has increased the price target for American Eagle Outfitters (NYSE:AEO) to $155.00, up from the previous $145.00, while keeping a Neutral rating on the stock. The adjustment follows expectations of a strong first-quarter performance from the company's Abercrombie brand, which is anticipated to continue its momentum into the second quarter.
The firm forecasts a first-quarter earnings per share (EPS) beat of 23 cents and anticipates that American Eagle will raise its full-year 2024 operating guidance. The positive outlook suggests that American Eagle's upcoming financial report may lead to upward revisions of the Street's full-year 2024 EPS estimates for the company.
Despite the optimism surrounding American Eagle's first-quarter results, UBS notes that the market has likely already factored in a solid performance. The firm points out that the current bullish sentiment may limit the stock's upside potential following the earnings announcement.
The options market is currently pricing in a potential stock price movement of plus or minus 14.0% around the earnings event, which is higher than the historical average movement of 12.5%. UBS, however, expects the actual volatility to be less than the 14.0% anticipated by the options market. This projection indicates a belief that the stock may not experience as significant price fluctuations as options traders are predicting.
InvestingPro Insights
As American Eagle Outfitters (NYSE:AEO) approaches its first-quarter earnings report, InvestingPro data provides a deeper dive into the company's financial health and stock performance. With a market capitalization of $4.66 billion and a P/E ratio that has adjusted to a more attractive 16.39 in the last twelve months as of Q4 2024, American Eagle appears to be trading at a valuation that is mindful of its near-term earnings growth. This is corroborated by a PEG ratio of 0.77, suggesting that the stock may be undervalued based on its earnings growth rate.
InvestingPro Tips reveal that analysts are taking a positive stance on American Eagle, with four analysts revising their earnings upwards for the upcoming period. This aligns with UBS's expectation of a first-quarter earnings per share beat. Additionally, the company's stock price has seen a significant uptick, with a 44.17% return over the last six months and an impressive 99.97% return over the past year. These movements reflect a robust performance that could be indicative of investor confidence in the company's strategic direction and operational execution.
For those looking to further explore American Eagle's investment potential, InvestingPro offers more tips on the stock. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and access a total of 10 additional InvestingPro Tips to aid in making an informed investment decision.
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