Analyst: Buy This Retailer After Black Friday

American Eagle earnings are expected next Wednesday, Dec. 5

by Karee Venema

Published on Nov 26, 2018 at 9:35 AM
Updated on Nov 26, 2018 at 10:11 AM

Deutsche Bank upgraded American Eagle Outfitters (NYSE:AEO) to "buy" from "hold," saying the retail stock is attractive at current levels. AEO stock closed last week at $19.54, but is up 5.5% this morning at $20.62.

This upbeat outlook just echoes the broader sentiment seen among the brokerage bunch, with nearly all of the 12 analysts in coverage maintaining a "buy" or better rating. Plus, the average 12-month AEO price target of $25.08 is a 22% premium to the security's present perch.

Options traders have taken the bullish route toward AEO in recent weeks, too. In the last 10 trading days, the weekly 12/7 21-strike call saw the biggest increase in open interest, and data from Trade-Alert points to mostly buy-to-open activity here. If this is the case, the goal is for the equity to break out above $21 by the close on Friday, Dec. 7 -- a time frame that includes American Eagle's earnings report, slated for release the morning of Wednesday, Dec. 5.

Looking closer at the charts, AEO shares have shed roughly 31% since their late-August 11-year peak of $29.88, but have found a recent foothold atop their year-to-date breakeven mark of $18.80. However, the round $20 level kept a tight lid on the shares last week, and currently coincides with American Eagle stock's 320-day moving average.


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