Here's Why Morgan Stanley Downgraded American Eagle Outfitters, Sees Considerable Downside

  • Morgan Stanley analyst Kimberly Greenberger downgraded American Eagle Outfitters Inc AEO to Underweight from Equal-Weight with a price target of $8, down from $22, implying a 32% downside.
  • The analyst noted the company reduced its 2022 guidance as its optimism proved excessive. Greenberger sees further risk to sales driven by significant Average Unit Retail (AUR) giveback.
  • She cited that the company needed to cut its lofty 2023 targets, keeping in mind the demand reversion in the second quarter.
  • Consumers will be more price-selective, making it even more difficult for retailers to extract price increases as they attempt to offset input cost inflation & elevated freight expense.
  • Greenberger said she sees a further downside to margins, driven primarily by merchandise margin giveback and topline uncertainty.
  • Price Action: AEO shares are trading lower by 9.44% at $11.85 in premarket on the last check Tuesday.
  • Photo Via Wikimedia Commons

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