Goldman Sachs Upgrades American Eagle Outfitters (AEO) to Conviction Buy

Goldman Sachs upgraded American Eagle Outfitters (NYSE: AEO) to Conviction Buy with a 6-month price target of $19 (up from $18), suggesting 22% upside.

The firm sees a sizeable opportunity for margin recovery from significantly depressed levels, as they see the teen retail competitive dynamics to stabilizing or improving. Also cost reduction will yield significant improvement to IMU, and the strategic reductions in inventory will reduce markdowns.

"We continue to believe consensus and shares do not adequately reflect this opportunity, with consensus EPS embedding only 120bp of gross margin expansion over the next two years (vs. 800bp of erosion since 2007) and shares trading at only 12.5X 2013E consensus EPS," the analyst commented.

2012E/2013E EPS were unchanged and they introduce 2014E of $1.86.

For an analyst ratings summary and ratings history on American Eagle Outfitters click here. For more ratings news on American Eagle Outfitters click here.

Shares of American Eagle Outfitters closed at $15.54 yesterday.

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Constellation Brands (STZ) PT Lowered to $145 at UBS on Softer Consumer Backdrop
• Alamtri Minerals Indonesia (ADMR:IJ) PT Lowered to IDR2,230 at JPMorgan
• Weatherford International plc (WFRD) PT Lowered to $116 at UBS