Wedbush: American Eagle Bull Case Is Priced Into The Stock

With the stock up more than 40 percent since mid-May, Wedbush is dropping its bullish stance on retailer American Eagle Outfitters AEO.

The Analyst

Wedbush's Jen Redding downgraded American Eagle Outfitters from Outperform to Neutral with an unchanged $29 price target.

The Thesis

The case against buying American Eagle's stock is based strictly on valuation reasons, as the company remains well-positioned within the retail landscape, Redding said in the downgrade note.

American Eagle will continue executing well and take advantage of a strong denim selling season ahead of the important back-to-school period and capitalize on recent weakness at rival PINK, the analyst said. American Eagle is likely to continue improving in core categories, including apparel, accessories and inventory management initiatives, he said. 

The stock's 40-percent gain since May is more than double the 16-percent gain seen in the retail sector as a whole, Redding said. Shares are now trading north of Wedbush's $29 price target and within striking distance of the 52-week high of $29.88.

The stock now prices in most of the bull case upside scenario, the analyst said.

Price Action

American Eagle shares were down nearly 3 percent at $27.57 at the time of publication Monday. 

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Photo by Dwight Burdette/Wikimedia.