UPDATE: FBR Capital Markets Initiates Coverage on American Eagle Outfitters with Market Perform Rating, $15 PT on Long-Term Positive Outlook

In a report published Wednesday, FBR Capital Markets analyst Susan Anderson initiated coverage on American Eagle Outfitters AEO with a Market Perform rating and $15.00 price target. In the report, FBR Capital Markets noted, “We are initiating coverage of American Eagle Outfitters, Inc. (AEO) with a Market Perform rating and a 12-month price target of $15 per share. AEO has recently been the victim of weak mall traffic, which has been exacerbated by product mix issues at the company. We believe that AEO is one of the best-run teen retailers and that its initiatives could be positive for the company in the longer term. These initiatives include (1) global expansion, (2) expanding and repositioning the aerie brand, (3) opening outlet stores and selling made-for-outlet product, and (4) expanding direct-to-consumer and omni-channel retailing. The stock has experienced a significant decline recently (–30% versus +19% for the S&P 500 year to date), but we believe valuation is still a bit high, particularly when compared with stronger players such as GPS (consensus FY2 P/E of 12.4x versus 13.2x for GPS and 13.2x for EXPR) and given the challenges the company is facing. We would become more positive on the stock at a more attractive valuation or once it is clear that the company can successfully reignite its brand and prove consistency in its SSS and margins.” American Eagle Outfitters closed on Tuesday at $14.07.