Can American Eagle Stock Rebound After A 16% Fall?

American Eagle Outfitters’ stock (NYSE: AEO), which sells men’s and women’s apparel and accessories under the American Eagle, Tailgate, Todd Snyder, and Aerie brands, has declined 16% over the last twenty-one trading days (one month) and currently stands at around $26. It should be noted that the broader S&P500 returned a flat growth during the same period. In Q2, the company saw a slight earnings beat and revenue miss. While the retailer’s revenue was the highest it has been in a second-quarter at $1.2 billion, and up 34.7% year-over-year (y-o-y), it still missed the analyst consensus slightly by $30 million. To break down the revenue growth, AEO’s store revenue grew by 73% y-o-y but digital revenue fell 5% during the same period. It looks like some investors might have liked to see the company perform a little better on the digital front, but it should also be noted that the company was up against a tough comparison when digital demand surged 48% y-o-y in fiscal Q2 last year. Compared to the pre-Covid quarter, the company’s store revenue increased 4% and digital revenue grew 66%.

We believe that after such strong financials the company’s stock looks undervalued and could see gains in the long term. However, the company’s stock could continue to decline further in the near term, due to the new Delta variant outbreaks likely threatening to stall the customer traffic surge it enjoyed in the early summer weeks. Specifically, there is an 80% chance of a fall for AEO stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the stock price over the last ten years. See our analysis on AEO Stock Chance of Decline for more details.

Calculation of ‘Event Probability’ and ‘Chance of rising’ using last 10 year data

[1] -16% or higher return during five-day period in 17 times out of 2516; Stock rose in the next 5 days in 12 of these 17 instances

[2] -19% or higher return during ten-day period in 27 times out of 2516; Stock rose in the next 10 days in 12 of these 27 instances

[3] -23% or higher return during twenty-one-day period in 35 times out of 2516; Stock rose in the next 21 days in 7 of these 35 instances

E-commerce is eating into retail sales, but this might be an investment opportunity. See our theme on E-commerce Stocks for a diverse list of companies that stand to benefit from the big shift.

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