Wunderlich Upgrades American Eagle To Buy, Expects To Outperform Expectations

Google Trends data indicates that American Eagle Outfitters AEO is poised to beat 2Q expectations, despite challenging comps, Wunderlich’s Eric Beder said in a report. He upgraded the rating on the company from Hold to Buy, while raising the price target from $13 to $22.

Upside Potential In 2Q

Google Trends data indicates upside potential for American Eagle in 2Q. “Of the 10 brands we analyzed via the statistical/linear-regression process, American Eagle posted the highest YoY growth in search-term interest, with Google search popularity for the teen retail brand increasing 7.9% YoY,” analyst Beder wrote.

This would mark the fourth consecutive quarter of positive y/y gains for the brand, and the seventh straight quarter of sequentially better y/y search-term trends.

There appears to be a 52 percent probability of American Eagle generating at least 6 percent revenue growth in the quarter, which is significantly higher than the consensus expectation of 2.6 percent growth. There is also a 95 percent probability of the company reported at least 2.1 percent sales growth for 2Q, Beder mentioned.

The data highlights that the company is “moving even closer to a lifestyle brand focused business with an emphasis on denim and innovation,” the analyst commented, while adding, “Given that 2Q faces the toughest comparisons (a +11% comp in the corresponding quarter) for the fiscal year, by far, we believe a result this strong would lead investors to view AEO even more favorably.”

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