Market Overview

Morgan Stanley Retail Moves: Upgrades Aeropostale, Downgrades Express


Analysts at Morgan Stanley (NYSE: MS) were active on Tuesday morning, adjusting ratings on a couple of popular retailers. The firm Upgraded shares of Aeropostale (NYSE: ARO) from Underweight to Equal Weight and downgraded Express (NASDAQ: EXPR) from Overweight to Equal Weight. Aeropostale shares have gained a little less than 2 percent after being upgraded, but are trending lower on an intra-day basis. Year-to-date, the stock is up almost 30 percent but remains off of its highs from earlier in 2012.

This could be a stock for traders to buy while shorting names with exposure to higher end clientele. Stocks such as Coach (NYSE: COH), Michael Kors (NYSE: KORS) and Saks (NYSE: SKS) have been falling in recent sessions as the market becomes more and more worried about the luxury segment. Alternatively, Aeropostale is a lower-end retailer which is more exposed to teens and young adults. While the outlook for this segment may not be stellar, the shares have been rising in recent weeks, likely as investors rotate out of the high end and into lower-end retailers.

On Tuesday, Express shares were last trading down around 2 percent to $18.28 after the downgrade at Morgan Stanley. While this stock could be a candidate to benefit from the rotation out of luxury retailers, it has been under pressure in 2012. Year-to-date, Express has lost a little more than 8 percent and the stock is well off its highs from earlier in the year.

Nevertheless the stock is actually trending up on an intra-day basis and could be a good value at current levels. Shares are trading at a trailing P/E of 11, a forward P/E of 8.92, and a PEG ratio of 0.57. Despite the downgrade at Morgan Stanley, conservative investors may prefer to own EXPR to some of the high-end names which continued to be pressured.

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