Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Position Status | Return(%)* |
|---|---|---|---|---|---|---|---|---|
| 2 Dec, 25 | AEO | Buy | USD 21.25 | USD 22.31 | USD 23.59 | 1 day | Closed |
12.26%
|
*Return(%) represent the percentage change between the entry price and exit price of the recommendation.
Data Powered by EOD Historical Data (“EODHD”).
American Eagle Outfitters, Inc. operates as a multi-brand specialty retailer in the United States and internationally. The company provides jeans, apparel and accessories, and personal care products for women and men under the American Eagle brand; and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. It also offers menswear products under the Todd Snyder New York brand; and fashion clothing and accessories under the Unsubscribed brand. The company sells its products through own and licensed retail stores; concession-based shops-within-shops; and digital channels, such as www.ae.com, www.aerie.com, www.toddsnyder.com, and www.unsubscribed.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.
Improved Gross Margin Performance: AEO expanded its gross margin from 38.6% in Q2 FY24 to 38.9% in Q2 FY25, representing a 30 basis-point improvement driven by a 50 basis-point increase in merchandise margins from reduced markdowns
Growth in Aerie Comparable Sales: Aerie delivered a 3% increase in comparable sales in Q2 FY25, outperforming the prior-year period’s flat-to-moderate growth and demonstrating sustained brand momentum
Decline in Total Net Revenue: Total net revenue declined from USD 1.291 billion in Q2 FY24 to USD 1.284 billion in Q2 FY25, marking a 1% year-over-year contraction, driven mainly by weaker American Eagle brand performance
Increase in Ending Inventory Levels: Ending inventory increased from USD 663.7 million in Q2 FY24 to USD 718.3 million in Q2 FY25, representing an 8% year-over-year rise, influenced by tariff-driven cost inflation and unit growth
AEO faces key investment risks including exposure to volatile consumer demand, increasing product costs driven by tariffs and raw-material inflation, competitive pressures in apparel retail, and potential disruptions from supply chain, inventory management, and macroeconomic uncertainty
| Entry Price | Support* | Target 1** | Target 2** |
|---|---|---|---|
| 21.25 | 19.0 | 22.31 | 23.59 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
**Target prices may vary by ±0.5% depending on market volatility.
Stable Top-Line Performance Amid Softening Comparable Sales: During the second quarter of fiscal 2025, American Eagle Outfitters, Inc. (AEO) delivered revenue of USD 1.28 billion, reflecting a modest 1% decline year-over-year as softer comparable sales offset gains in select categories. Total comparable sales decreased 1%, driven by a 3% decline in the American Eagle segment, partially cushioned by a 3% increase in Aerie comparable sales, highlighting the brand’s resilience and consumer traction.
Margins Strengthened Through Lower Promotional Intensity: Gross profit reached USD 500 million, with gross margin expanding 30 basis points to 38.9%, supported primarily by improved merchandise margins due to lower markdown activity. Management’s disciplined inventory and pricing measures helped offset slight deleverage in occupancy-related costs. This margin expansion underscores the company’s enhanced operational efficiency and more targeted promotional strategy.
Operating Profitability Supported by Cost Management: Selling, general and administrative (SG&A) expenses declined 1% year-over-year, remaining stable at 26.7% of revenue, reflecting reduced compensation costs following recent restructuring initiatives . These efficiencies, combined with margin improvements, contributed to an operating income of USD 103 million, representing a 2% increase versus the prior-year quarter and an expansion of the operating margin to 8.0%, up 20 basis points.
Solid Earnings Growth Driven by Profitability Improvements: Net income for the quarter totaled USD 77.6 million, largely consistent with the prior year’s result, while diluted earnings per share increased 15% to USD 0.45, benefiting from significant share repurchases that reduced diluted shares outstanding to 172 million. This reflected management’s continued focus on shareholder returns and disciplined capital allocation.
Inventory Levels Influenced by Tariffs and Unit Growth: The company ended the quarter with inventory of USD 718 million, representing an 8% year-over-year increase, with units up 3%. The increase was primarily attributable to tariff-related cost impacts rather than excess product accumulation. Inventory turns remained stable at 1.15, only slightly lower than 1.18 in the prior-year period, indicating continued progress in balancing supply with demand.
Robust Capital Allocation Through Share Repurchases and Dividends: AEO continued its shareholder-focused capital deployment, completing a USD 200 million accelerated share repurchase (ASR) during the quarter and achieving USD 231 million in year-to-date repurchases, reducing outstanding diluted shares by roughly 10%. Additionally, the company paid USD 21 million in dividends during the quarter, reinforcing its commitment to consistent shareholder returns.
Strengthened Financial Position Supported by Disciplined Cash Management: Despite a decline in cash and cash equivalents to USD 126.8 million, reflecting ongoing investments and capital returns, the company maintained a healthy liquidity profile and a current ratio of 1.62, slightly above the prior year’s 1.57. Continued cost controls, inventory discipline, and stable operating cash flows position AEO to navigate evolving demand conditions while executing long-term strategic priorities.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on American Eagle Outfitters, Inc. (NYSE: AEO) at the closing market price of USD 21.25, as on Dec 01, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Cyclical Industry: Apparel Retail
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| AEO American Eagle Outfitters Inc |
-0.655 2.66% | 24.00 | 15.13 | 9.70 | 0.63 | 1.98 | 0.87 | 7.14 |
| IDEXY Industria de Diseno Textil SA ADR |
-0.28 1.71% | 16.10 | 23.88 | 20.96 | 3.85 | 6.91 | 3.52 | 12.70 |
| IDEXF Industria de Diseño Textil S.A |
-0.8475 1.30% | 64.33 | 23.78 | 21.19 | 3.85 | 6.99 | 3.62 | 13.04 |
| TJX The TJX Companies Inc |
1.71 1.14% | 151.88 | 25.99 | 22.22 | 1.96 | 15.02 | 2.12 | 17.09 |
| FRCOF Fast Retailing Co. Ltd |
-12.78 3.10% | 400.00 | 36.35 | 37.31 | 0.03 | 6.50 | 0.03 | 0.11 |
Data Powered by EOD Historical Data (“EODHD”).
Markets are trading in a highly volatile zone currently due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels as on December 2, 2025. The reference data in this report has been partly sourced from REFINITIV.
Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned has been achieved and is subject to the factors discussed above.
Note 4: StockNextt reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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